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Mid Atlantic R EAL E STATE J OURNAL Publisher ............................................................................ Linda Christman Publisher ............................................................................... Joe Christman Publisher/Senior Account Executive ................................. Elaine Fanning Section Publisher .................................................................... Steve Kelley Senior Editor/Graphic Artist .................................................Karen Vachon Production Assistant ...................................................................Julie King Office Manager ................................................................... Joanne Gavaza Contributing Columnist .......................................................Debra Stracke Mid Atlantic R EAL E STATE J OURNAL ~ Published Semi-Monthly Periodicals postage paid at Rockland, Massachusetts and additional mailing offices Postmaster send address change to: Mid Atlantic Real Estate Journal, 312 Market St. Rockland, MA 02370 USPS #22-358 | Vol. 26 Issue 5 Subscription rates: $99 - one year, $198 - two years, $4 - single copy REPORT AN ERROR IMMEDIATELY MARE Journal will not be responsible for more than one incorrect insertion Toll-Free: (800) 584-1062 | MA: (781) 871-5298 | Fax: (781) 871-5299 www.marejournal.com The views expressed by contributing columnists are not necessarily representative of the Mid Atlantic Real Estate Journal
Mid Atlantic Real Estate Journal
Debra Stracke
ITRAGlobal Warns Commercial Tenants of Operating Expense Increases
W
A S H I N G T O N , DC — According to Debra Stracke An-
derson , president and CEO of Sloan Street Advisors / ITRA Global , who specializes in com- mercial tenant representation, most tenants have received their 2013 expense reconcili- ation statements of operating expenses and taxes from their landlords. Typically, tenants have 30-60 days after receiving these statements to give notice to the landlord if they wish to perform an audit. If a company is leasing office space, industrial space, warehouse or other com- mercial real estate, now is the time to determine if the landlord is over-charging for expenses by performing a lease audit. For many commercial real estate tenants, rent is the second largest operating expense after personnel costs. Auditing the landlord’s expenses provides confidence that these costs are being properly billed. Not all tenants need to audit lease ex- penses annually, but here are a
few examples of situations that could trigger an audit: 1. If a gross-leasewas executed in 2013, the tenant will have only one opportunity to audit the base year (2013) expenses. If a ten- ant waives this right, he may be overbilled for all ensuing years due to a landlord understating the base year expenses. Even a tenant with a net-lease signed in 2013, while these don’t typically have a base year dollar amount, should consider an audit to verify they are only being charged for permitted expenses. 2. Landlords of mixed-use properties routinely overcharge tenants for operating expenses
and real estate taxes, because the landlord allocates expenses to the various components of the complex using methods which don’t reflect the actual usage of services by each component. Substantial operating expense increases often signal that a landlord has improperly cal- culated the expenses. A tenant should look at specific line items of expense when reviewing the year-to-year increases. 3. Buildings in which land- lords have expendedmajor capi- tal on building systems, exteri- ors or common areas certainly should be considered as an audit continued on page 3A
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