Most professionals are diligent about posting meetings and conferences on their calendars. Beyond options and expirations, however, few people have a systematic method for tracking and managing timely lease-related action items.
Whether you have a ground lease for a convenience store or acres of warehouse space for large industrial equipment, the process is the same. Know your critical dates and deadlines and have a software platform to easily track and manage them. Below are a few areas to keep in mind.
Most percentage rent reconciliations are due at the end of the year, but it’s important to check your lease language to be sure. Typical leases include a 60-day window of time to prepare and submit your calculations, but don’t wait until the last minute. In fact, it’s best to set reminders to periodically check your calculations so you won’t overpay and lose money, or underpay and are surprised to owe additional money at year-end.
Not all CAM reconciliations are sent at the same time of year, if at all, so review the lease and know when to expect them. When regular statements arrive, carefully compare every pass-through expense against the exact lease language and itemized CAM budget from the landlord, if available, to ensure you were appropriately billed. It’s always easier to dispute expenses before they’re paid rather than trying to obtain reimbursements after the fact. By keeping CAM expenses on your radar, you’ll significantly reduce the amount of year-end paperwork.
Many people are unaware that their lease includes termination rights, allowing them to vacate the premises with no penalties IF they meet certain requirements and deadlines. For example, the terms of a retail lease may state that if sales fall below a specified threshold for the preceding 6 months of the third year, then the lessee has the right to terminate the lease.
Lease termination is not a decision that can be made overnight. Before pulling out of a location, an in-depth analysis of historical sales and the projected revenue stream must be conducted. And if the CFO and the real estate department are not sharing the same information in one software system, this conversation may never occur.
Licenses and Permits
While licenses and permit requirements are not outlined in the lease, ensuring they are renewed on time often falls to the same people who track critical lease dates. Therefore, it’s most efficient to track them in the same software platform as all other critical dates and deadlines since missing just one can result in the loss of your most lucrative location. In fact, major restaurant chains have had to make decisions about closing locations that fail to renew their liquor licenses on time because they know the financial impact will be devastating. Unfortunately, this occurs more often than you might think.
Without a software platform for tracking critical dates and deadlines, managing it all is like juggling Jell-O®. Just when you think one issue is under control, something else falls through the cracks. And if you’re using Excel, especially for businesses with 20+ locations, it’s nearly impossible to ensure that all users are working with real-time data.