LEASE AUDITING CASE STUDY 2

Correction Of Base Year Language Violation Saves Tenant $208,000

Client
Fortune 500 commercial operator of fitness centers that leased 22,000 square feet in suburban Cleveland, OH

Audit Discovery
The lease provided that real estate taxes and insurance were to be billed over the base year. The landlord calculated correctly tenant's share of taxes and insurance until our client expanded its premises by building a second story above the existing space. Since then, the landlord abandoned the base year calculation. MBG Consulting performed a forensic review of all pertinent files and reconstructed what the accurate calculations should have been. Our client had been overcharged approximately $13,000 a year for 16 years. Change in ownership had contributed to the error as well.

Resolution
MBG Consulting researched the state law and discovered that Ohio's statue of limitations is 15 years. MBG Consulting was successful in proving that there were no formal documents justifying the lack of base year calculations and recovered for the entire overbilled amount for our client.

Lessons

• All agreements must be in writing
• Base year calculations should remain in force regardless of change in premise’s size or change in ownership.