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Tax and Operating Expense Audit Recovers $109,000.

Tax and Operating Expense Audit Recovers $109,000

Lease Auditing
Client: Law firm

Audit Discovery:
The lease provided that real estate taxes for first two lease years were not to exceed a particular dollar value. The operating expenses were to be capped at 5% cumulative increase per year after the second year. The landlord did not account for the limit on taxes nor did they calculate the pass-through expenses utilizing the 5% cap. The accounting was further complicated since the lease provided specific language for lease years that differed from calendar years. The landlord was also using a different Consumer Price Index (CPI) and different CPI adjustment methodology than stipulated in the lease.

Resolution:
MBG Consulting adjusted the tax expenses since lease inception to reflect the capped amount for first two lease years and capped increase in operating expenses after the second lease year. The CPI adjustment was corrected as well and a new calculation standard was set. This also assisted the landlord in future calculations and provided our client with a specific tool to monitor billing accuracy.


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