LEASE AUDITING CASE STUDY 3

Adjustment Of Expenses Treated By Landlord As Non-Controllable Saves Tenant $434,200

Client
Fortune 100 insurance company that leased 400,000 square feet in suburban Chicago, IL

Audit Discovery
The lease provided for a cap on increases in controllable expenses and such expenses were clearly defined in the lease. The landlord applied the cap only on certain expenses and chose to pass through all other expenses to our client. The landlord also passed through various hazardous material removal expenses that were prohibited in the lease, as well as certain mold mitigation charges that were covered by insurance.

Resolution
MBG Consulting discovered that the landlord treated certain expenses as non-controllable, arguing that union charges cannot be controlled. The lease, however, specifically excluded the variation due to union labor agreements. MBG Consulting examined the insurance policies in place and discovered that mold mitigation expenses were covered by insurance. Calculations were revised and our client was awarded a credit of $434,200.

Lessons

• Carefully check language on controllable and non-controllable expenses and verify adherence to the language