LEASE AUDITING CASE STUDY 4

Removal Of Disallowed Expenditures Decreases Annual Expenses Passed To Tenant By $212,300

Client
Major encyclopedia printer that occupied 39,000 square feet in Chicago, IL

Audit Discovery
The Lease specifically excluded expenses related to operating the parking garage and any commercial establishments such as fitness center, clubs, and kiosks. The landlord violated the language and passed on to all tenants the expenses related to parking garage operations and fitness center. The landlord argued that latter was an amenity that benefited the tenants.

Resolution
MBG Consulting researched and discovered that when our client entered into the lease, the building did not have a fitness center. Once it was built, the landlord started passing through the expenses, not considering the initial intent and specific lease language. The annual reconciliation of operating expenses was revised to exclude both parking garage and fitness center charges of $212,300.

Lessons

• Carefully check language on disallowed operating expenses.