How to avoid commercial lease audits and litigation

Many commercial tenants are resorting to leasing audits to leverage lower rent rates with property owners. It is thus imperative that you prepare for these audits and the role they may play in future negotiations. This post will go over how you can minimize your exposure to these audits.

A common technique to minimize the role of audits is through common area maintenance (CAM) provisions. CAMs impose mutual obligations to maintain common areas, it ensures that the tenant bears some responsibilities. Additionally, some leases permit audits but only under strict timelines and conditions. Finally, some leases require the tenant to pay the auditor, however, this also removes your financial influence over the auditor (i.e. the auditor will be more inclined to find a favorable result for the party that is paying them).

The best way to avoid audits is to resolve tenant disputes quickly. You can do this by carefully negotiating and drafting the lease agreement. For instance, include how operating expenses are calculated and passed through to the tenant. You can also discuss the guidelines that will be used when classifying expense. Finally, clearly lay out which expenses are included in the tenant’s lease agreement and those that are not.

If your commercial properties are at risk of audit, then you should contact a lawyer at your earliest convenience. An attorney can go over the nature of your commercial contracts, their vulnerabilities, issues that were overlooked, and other problems that could come up. At this point, you need a plan to deal with these issues and minimize the impact on your business. A lawyer can help you by ensuring that the audit is swiftly addressed and minimally impacts your operations.

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