In commercial leases, tenants often overlook a provision that can result in millions of dollars in wasted spending – the requirement for an independent CPA to review the landlord’s financial records. This provision, known as “lease audit rights,” can hinder tenants’ ability to challenge excessive charges in operating expenses. While independent CPAs are skilled in accounting principles, they may not have the expertise to identify nuanced overpayments in lease agreements.
The concept of independence in CPA reviews means that the same conclusions are likely to be reached by both the landlord’s and the tenant’s independent CPAs. This limits tenants’ ability to challenge excessive charges in their lease agreements. Instead of independent representation, tenants need advocates who can thoroughly investigate potential sources of overpayment and negotiate fair terms in their leases.
To address this issue, tenants should raise awareness among their legal and commercial real estate experts about the impact of restrictive “lease audit rights.” They should advocate for more favorable expense review terms and negotiate the ability to hire specialists who can assess compliance with lease terms. By proposing fair compromises and balancing the needs of both parties, tenants can protect their financial interests and prevent wasted cash from this overlooked provision in commercial leases.
The goal is to empower companies to safeguard their financial interests by understanding these provisions, engaging the right experts, and negotiating fair terms with landlords. By taking proactive steps to address the independent CPA requirement in leases, tenants can more effectively manage their expenses and ensure the success of their organizations.
This article is not intended as legal advice, and readers are encouraged to consult with an attorney for advice on their specific situations. The information provided by Forbes Business Council aims to educate business owners and leaders on important considerations in commercial lease agreements.
