Lease Administration Software: Is It For You?February 28, 2011
Imagine this scenario. As the director of real estate for your corporation, you’ve just completed a lease for your headquarters. The details include a five year term with full service rents increasing slightly each year. The Base Year is this current year so the operating expenses are included in the rent for the first year but in the second, if expenses go up, the landlord will be looking to your company for the difference in costs. You have an option to renew at fair market rent at the end of the first term but there are specific dates by which you need to notify the landlord if you want to exercise the option. You also have a sublease clause allowing you to rent out any extra space you have to a third party but there are specifics that go along with accomplishing that. What will you do with these details and dates that are in the lease? How will you know when your rent increases and what it increases to, what your Base Year operating expenses are, what the procedure is for exercising your option to renew and when it should happen? These are just the first and most basic questions associated with most commercial real estate leases.
Now take that scenario and multiply it by five, 15 or 50 locations. As the number of leases increases, so does the difficulty in tracking the details associated with them. When you have leases in many different markets, both domestically and internationally, the details become even more complicated as the trends in each of the markets vary.
Many companies use a static system, if any, to track this information. Within your corporation, it’s likely that at least one person is responsible for knowing the details of your real estate portfolio and can use any method in tracking the information. They may look at the documents once in awhile, add it to their work calendar or create a spreadsheet with important information but it’s all in one location, available only to those immediately responsible. If they get sick, go on vacation or worse, leave the company, no one else knows where the details are to be found.
This is where Lease Administration Software (LAS) can be a helpful tool to track the specific costs, dates and clauses associated with each lease obligation and send alerts when it is time to take action. It is a dynamic system that can be updated by key people in your organization and viewed by others on an as-needed basis. Custom reports can be generated and sent to key players. Some systems can even pay your rent for you. I can help you evaluate the leases you have and determine if LAS is right for you and if so, which product. We’ll start with basic questions like:
- How many leases do you have now?
- What are your growth plans for the future?
- Are your locations domestic, international or both?
- What lease data and reports would be helpful for your company to be able to produce and distribute?
- How many people would benefit from having direct access to lease information via computer?
- How many of them need to manipulate the data versus just viewing reports?
- If international locations, will you be tracking multiple currencies? If so, how many and which ones?
- If international locations, do users speak different languages or is an English only software sufficient?
Will Lease Administration Software Benefit You?
Take this Survey and Count Your “No” Responses
- Do you know where your leases are located?
- Can you access them immediately?
- Do you know when your leases expire?
- Do you know when your next rent increase takes place?
- Can you run detailed reports showing rent obligations for this current year compared to last?
- Do you have a system in place that alerts you of important dates?
- Do the people who need to have this information have access to it at all times?
- If changes are made to your leases, are those who need to know notified?
5-8 “No” Answers LAS will benefit you
3-4 “No” Answers LAS may streamline your real estate activities
1-2 “No” Answers LAS may add benefit, but your current system is working
Bonus Question: Have you ever missed an opportunity in a lease because the landlord notification deadline passed? If Yes, LAS can help you stay on top of these details.