Correction of Base Year Saves Company $2.5 Million over Life of Lease

Summary:

Through lease auditing, the client saved $500,000. If the errors had been left uncorrected, the client would have made over-payments of over $2.5 million over the life of the lease.

Client
Fortune 100 Company located in Atlanta, Georgia.

Audit Discovery

The lease term was 25 years, with an adjustment to the Base Rent every five years to bring the rent to current market levels. Part of this quinquennial adjustment was to add the tenant’s most recent increase in operating expenses and real estate taxes to the annual rental rate paid for the prior year. By doing so, prior year increases in expenses and taxes were built into the current adjusted rental rate.

Through our audit process, we discovered that each time the rent was updated, the landlord failed to change the Base Year to the current adjustment year. This error created a compounding of the expense increases in each five-year renewal term. As a result of this error, our client was over-billed approximately $500,000, which if left uncorrected, would cause rent over-payments of over $2.5 million over the life of the lease.

Resolution

The landlord agreed to modify the base year and refund all past years’ overcharges.

This case study is from KBA Lease Services, a leading lease audit and cost recovery firm headquartered in Woodbridge, NJ.

{ 0 comments… add one now }

Vision | Products | Solutions | Customers | Blog | Resources | Company | Home
Copyright © 2017 CREInFocus - all rights reserved