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Frequently Asked Questions - Starr Diversified, Inc.
Frequently Asked Questions about our free forms, documents, lease audits, and more.
Starr Diversified, Inc. receives questions about forms, documents, leases, and property management everyday. We have compiled these questions, provides answers, and have presented some of the more popular queries below.
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What is a lease audit?
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A lease audit is an in-depth review of the tenant’s occupancy cost to ensure that the cost comply with the lease requirements.
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What skills should I look for in a lease audit firm?
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A few of the important skills to look for in a possible audit firm are:
• Listening to what the client wants and prefers while providing advice in the potential audit activity, instead of telling the client what he/she should do
• Expertise level in analyzing and interpreting lease clauses, while looking for ways to improve the lease structure and administration going forward
• Proven history of preserving landlord-tenant relationships while recovering money from landlords
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Do I have the right to audit my lease?
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In most cases the answer is YES.
With a properly executed lease the tenants is granted the right to review the landlords books/records to ensure the pro-rata charges are correct. The lease usually states that the tenant has the right to visit the landlord’s place of business to review the applicable accounting records, upon reasonable notice.
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What is the cost to audit my lease?
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Contingency basis?
Starr Diversified can provide a lease audit service on a contingency basis, for a lease that does not require an extended amount of time to resolve. This means, that the Client can handle the lease with little effort after Starr Diversified has given them the tools in which to carry out the savings noted.
Pay as you go or after resolved?
Our fee is a percentage of the savings realized by the client and is payable only when the client has actually received or benefited from those savings.
Flat fee?
Starr Diversified can provide a lease audit service based on a flat fee if we have negotiated up front what the exact terms are that you are looking for and how you want to resolve the situation. This means that you are aware of the problems that need to be resolved but do not have the time to resolve them in house and need the help of our team in assisting you to achieve this task.
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How does my relationship with my landlord change by conducting an audit?
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Most, if not all, tenants fear auditing their lease due to fear of damaging their relationship with their landlords. Some landlords welcome the reviews as a way of providing the tenants with peace of mind and as part of the lease administration process, while other landlords prefer that their tenants not audit the leases.
Most landlords are realizing that the tenants are conducting these reviews to adhere to their corporate guidelines/rules.
Some tenants are conducting audits because their internal audit group in order to justify that all lease charges are consistent with the obligations set forth in the lease. A majority of the time this is the only way for the tenant to verify their share of the costs.
The philosophy of Starr Diversified Inc. is to conduct these audits in a professional, courtesy and confidential manner. A good relationship is maintained by pursuing issues that are valid and well documented, in a fair manner.
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Why do I need to check my bills with an audit?
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Reviewing and correcting landlord billing errors can seem like an overwhelming job. However with in depth legal knowledge of lease clauses and accounting expertise this can be a stress-free activity.
Since most audits are a once a year activity most tenants are only able to identity the obvious errors. After these errors and the not so obvious errors are identified, Starr Diversified Inc. will be able to convince your landlord that these errors must be corrected, without negatively affecting your tenant/landlord relationship. Starr Diversified will be able to convince your landlord through effective communication and negotiation skills. With these skills we can communicate at your landlord’s accountant’s level in order to retrieve your overpayments.
By using an outside party such as Starr Diversified for your audit you can significantly increase your savings while minimizing tension.
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What is Starr Diversified lease audit process?
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Starr Diversified focuses on achieving the greatest net recovery for our client while maintaining a good relationship with the landlords.
Collection of Documents
A FREE preliminary analysis is conducted using all of the client’s internal lease related documents. These document, at a minimum, will consist of the lease, all amendments, exhibits, estoppels, all bills in question, and pertinent correspondences between the landlord and tenant, subleases are included if there are any. Once all the documents are received the preliminary analysis usually takes about a week.
Audit Review
Starr Diversified thoroughly reviews and analyzes all documents from the commencement of occupancy. This provides the basis of understanding to what the tenant agreed to. We will then compare the received bills to the lease obligations.
Resolution of Claims
Upon completion of the preliminary review Starr Diversified will present the findings to the tenant, at which point a determination will be made how best to discuss the findings with the landlord. A resolution plan will be developed with the tenant; where Starr Diversified will prepare all the necessary letters and review/explain each one with the client before sending to the landlord. At no point will Starr Diversified contact the landlord without the client’s knowledge and consent. After a resolution is reached we make certain that the landlord is in compliance.
Starr Diversified will provide a report on the total savings for the audit, and a schedule for follow-up activities to ensure full savings are realized over time. If requested Starr Diversified can monitor the lease and costs as needed to guard and validate savings.
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How long do I have to initiate/complete an audit?
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If a miscalculation is made most leases make it the tenants duty to find and notify the landlord, burden is shifted to tenant to find errors. If the tenant does not notify the landlord then the said charges are considered as accepted and landlord may overcharge until the error is found and corrected.
The tenant must usually follow a specific procedure to as detailed in the lease in order to preserve their rights. This procedure usually specifies a time limit, which can be anywhere between 30 and 90 days after receipt of the bill, check your lease for these limits.
A few of the Common variations for restrictions regarding the content of the lease audit notice:
• Notification with Specific Objections
This is the most common restriction.
The tenant must notify the landlord to objection of the bill and specify the ways in which the bill is incorrect.
• Notification Only
Tenant is simply required to notify landlord that it is not accepting the bill as rendered.
• Audit Completed
Tenant has to complete review of landlord’s books by a certain time.
The notification time requirement must usually be subtracted from the time allowed to complete the review, thus resulting in less time available to conduct review.
Leases usually require tenant to pay first and then contest charges, unless you have already negotiated a more cost effective approach into your lease.
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What types of errors does Starr Diversified look for in a lease audit?
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The range of errors in lease charges can range from a simple miscalculation to widespread misinterpretation of the lease language. Even though all leases have a common structure they all also are unique since they are individually negotiated. The confusion and errors can be caused if each unique clause is not carefully followed.
Below are examples of just a few of the common errors:
• Operating Expenses / CAM Pass-Throughs
Pro rata share miscalculations
Base year inadequacy
Charging of excluded costs
Improper charging of capital expenditures
Miscalculation of costs among buildings
Failure to apply weighting to square footage
Excessive management and/or administrative fees
Inclusion of brokerage fees
Misinterpretation of expense cap formulas
• Base Rent Charges
Per square foot rent miscalculations
CPI miscalculations
Rent commencement errors
• Space Measurement
Improper inclusion of vertical penetrations
Improper inclusion of exterior building areas
Improper treatment of common areas
Mis-measurement of rentable and common areas
• Real Estate Taxes
Failure to apply tax refunds or adjust tax basis
Failure to pursue tax certiorari consistently from year to year
Improper inclusion of personal property taxes and/or income taxes
• Electric and Other Utility Charges
Misapplication of rates
Use of incorrect rate schedules and/or addition of surcharges
Wiring of meters to unrelated spaces and/or misreading of meters
Failure to recognize rate reductions
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If you have a question for our staff, please contact us and we will answer you via email and possibly post your question and answer here.
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