You’ve Moved Into Your New Office: Now What?
Once you have negotiated your lease for your new or current space with your landlord, made your tenant improvements, and moved in, you might think you’re done. You can just settle into the next 5-7 years of your lease and just stick the document in the drawer, right?
Sheryl L. Mazirow, President, CCIMCommercial leases are complicated, and your landlord is likely managing hundreds of tenants at once. Mistakes are common and costly for your business. One small honest error can cost you tens of thousands of dollars over the life of your lease. That’s where Mazirow Commercial comes in.
Where Lease Mistakes Happen
A typical lease is 30-80 pages long and a landlord has dozens or hundreds of tenants—that’s a lot of details to get right. You need to stay on top of every little detail, which is no mean feat when you’re also running a successful business. So where can those expensive mistakes creep in?
In the first year, or Base Year, of your lease, your landlord will use the year’s Operating Cost (OPEX) for the asset to establish the “base year” cost that all future year costs are compared against. (Costs like elevator maintenance, city taxes, and utilities.) Any increase over the Base Year OPEX is passed-through to tenants pursuant to their pro-rata share of space they occupy every year of their lease. OPEX is a standard in the market on a Full-Service Gross lease, which is the typical lease type for most office buildings. The OPEX is included in the cost of the base rent in the first year. You need to oversee and reconcile every cost to make sure it’s accurate, or you’ll wind up losing out on costs over the lifetime of your lease term.
- It cost $12.00/Rentable Square Footage (RSF) annually to run the building
- $12.00 is the Base Year
- The building is 80,000 RSF in round numbers
- It cost the Landlord 80,000 X $12.00 = $960,000.00/yr
- Cost increase across the board (no likely) increase by 1.5%
- $960,000.00 x .015 = $14,400/yr or $1200.00 a month
- Your practice occupies 1.42% of the asset
- 1.42% of $14,400.00 = $200.00 for the year of $16.59/month
And each year, you’ll need to track your operating expenses to ensure no errors and overcharges creep in. After all, your landlord is managing many other buildings—sometimes mistakes are made. A billing error of $250 per month might sound very small when you consider the high costs of commercial real estate. But over a five-year lease term, that little billing mistake would cost you $15,000. And you have better things to do with that money than overpaying your landlord.
Parking agreements can cause real headaches too. The mix of space options, rights, obligations, and tandem vs. single spots—it’s a lot to manage. Paying too much for parking you’re not using adds significant costs to your lease without any benefit to you.
Also consider an Estoppel, which is a 1-2 page summary of the key terms outlined in your 30-80 page lease that your landlord will need you to sign. Your Estoppel may have mistakes. If you inadvertently sign away one of your rights as a tenant in an Estoppel, that mistake is set in stone. For example, if a tenant signed an Estoppel that ruled they had to pay $15,000 in property taxes, and they failed to do so for 3 years, their mistake would amount to $45,000.
The Solution: Lease Administration & Management Services
So, your landlord is going to send you lots of documents all the time. There will be deadlines to meet, time pressure to sign them, and confusion. Are you signing the right documents? Do they match your agreements? Mazirow Commercial offers our cost-effective lease administration service—saving you money, time, and headaches on the lifetime of your lease.
We create an easy-to-follow Lease Abstract for you because we know real estate terms, understand agreements are complicated, and make sure all the intricacies of your lease are in order on a day-to-day basis. This means we manage your operating costs, your parking agreements, estoppel reviews, and much more.
Our expertise means you don’t have to worry—you can focus on running the business you’ve worked hard to build. We represent the interests of tenants, not landlords, so you know we’re always on your side through the life of your commercial lease.
- Creation of Lease abstract of the entire lease transaction to avoid loss of the Tenants’ rights and unexpected costly events
- Identify and track key rights negotiated, agreed to and achieved pursuant to the lease
- Forward-looking management of critical dates
- Detailed Operating Expense (OPEX) analysis of Base Year Expenses
- Perform Annual review of OPEX reconciliation and estimates
- Supervise Annual review of Base Rent Increase
- Manage Annual review of Parking Increase, if applicable
- Confirm Annual review of Parking Allotment
- Provide Annual Budgeting of anticipated OPEX and Base Rent increase
- When asked, Review of Estoppel Certificates other documents requested by the Landlord
- Audit Lease to identify and reverse charges that are not in compliance with the lease
- Review Monthly rent invoice to insure no overbilling by the Landlord
- Proactive Tracking of documents to ensure at all times you are in possession of all Lease documents
- Regular Tracking of Security Deposit to insure proper recording in your books at all times
- Calendared Quarterly Status Reporting to you
Our Lease Administration & Management Service is charged as a percentage of the rental consideration.
Schedule A Free Consultation
Ready to start saving time, money, and headaches on your commercial lease?
Call us today at 805-449-1945 to speak with one of our skilled tenant representation specialists.
SCHEDULE A FREE CONSULTATION
Ready to start saving time, money, and headaches on your commercial lease? Schedule a free consultation today with one of our skilled tenant representation specialists.