Overpaying on your commercial lease can quietly eat into your profits, but careful review of your lease expenses can save you significant amounts. By regularly auditing your rent and related costs, you can spot discrepancies and negotiate better terms. Here are some key areas to monitor to ensure you’re not paying more than you should.

Red Flags That You Might Be Overpaying

1. Sudden Rent Increases
If your rent jumps unexpectedly, dig deeper. While rent adjustments may happen, a large increase without clear justification could signal an overcharge.

2. Higher Costs Compared to Market Rates
Research rent rates for similar commercial properties in your area. If your lease costs are significantly higher than others, it may be worth investigating.

3. Lack of Transparent Documentation
If your landlord isn’t providing detailed billing statements or invoices, it can be hard to verify whether you’re being charged accurately. A lack of transparency could result in overpayment.

4. Unexplained or Hidden Fees
Watch out for any fees that aren’t outlined in your lease agreement. These can sometimes be added without proper documentation or justification.

5 Common Reasons for Rent Overpayments

1. Miscalculations in Rent
Errors in rent calculations happen. Always review your lease agreement and double-check that rent charges match the terms you agreed to.

2. Inaccurate Space Measurement
The rent you pay is often based on the size of your rented space. If the square footage is miscalculated, you could be paying more than necessary. Verify that the size of your leased area is correct.

3. Unapplied Concessions
Sometimes landlords offer concessions, like rent discounts or improvement allowances. Ensure these are being accurately applied and reflected in your monthly rent invoices.

4. Incorrect CAM Charges
Common Area Maintenance (CAM) charges can be a source of overpayment if they are not properly calculated. Confirm that your CAM charges are reasonable and correctly allocated based on the space you lease.

5. Tax Assessment Errors
Property taxes are often passed on to tenants, but errors in tax assessments could lead to inflated bills. Review your property tax assessments and compare them with local rates to ensure you aren’t being overcharged.

How to Effectively Audit Your Lease Costs

1. Know Your Lease Agreement
Get familiar with the specifics of your lease. Check the details of how rent is calculated, and pay attention to any additional charges or concessions.

2. Keep Organized Records
Maintain an organized file of all rent-related documents like lease agreements, invoices, and correspondence with your landlord. This makes the audit process smoother.

3. Verify Rent Calculations
Recalculate your rent based on the terms in your lease, ensuring any changes or increases are accurate and properly documented.

4. Compare Market Rates
Research rental prices for properties similar to yours. This can help you gauge whether your rent is in line with the market or if you’re overpaying.

5. Scrutinize Additional Fees
Check any extra charges in your rent invoices to ensure they’re valid and align with your lease terms.

6. Review CAM Charges
Examine your CAM charges to confirm they’re correctly calculated and that you aren’t being overcharged for shared property expenses.

7. Check Property Tax Assessments
Ensure that property tax assessments passed on to you are accurate. If needed, consult with tax professionals to clarify any discrepancies.

8. Seek Professional Advice
Consider hiring a CPA or lease expert to assist with your audits. They can help you spot potential overcharges and negotiate better terms.

By conducting regular audits of your commercial lease expenses, you can protect yourself from overpayments, correct any errors, and maintain a solid financial standing. A proactive approach to managing your lease agreements ensures you’re only paying what’s necessary, helping you keep more money in your pocket and boosting your business’s overall success.

If you want to learn more about how NTrust is leveraging AI to transform the lease abstraction process for our partners, write NTrust: [email protected] or call 562-207-1610.