Preparing to acquire locations? Avoid common mistakes. Read this best practices guide first. 

  • Solutions

    Platform

    • Lease Management Software
    • Lease Accounting Software
    • Artificial Intelligence
    • Assets & Contracts
    • Reporting & Analytics

    Services

    • CAM & Tax Reconcilliation
    • Lease Abstraction

    Industries

    • Food & Beverage
    • Hair & Beauty
    • Health & Fitness
    • Medtail
    • Petcare
    • Retail
    Ready to learn more?

    Watch our 2-minute demo video, or contact us to schedule a demo.

    Book a Demo
  • Resources
    Featured Story:
    "Outmaneuvering the Competition: How Leasecake Helped Me Secure a Prime Location"

    Read How >

    • Blog
    • Customer Stories
    • Guides
    • Webinars
    • Onboarding & Support
    Ready to learn more?

    Watch our 2-minute demo video, or contact us to schedule a demo.

    Book a Demo
  • Pricing
  • Company
    Company News
    EMERGING Fund Backs Leasecake as Strategic Investor
    Leasecake announces that EMERGING has joined as a strategic investor, closing the company's $10M Series A extension.
    Read News
    • About
    • Careers
    • Contact
    • Partners
    Ready to learn more?

    Watch our 2-minute demo video, or contact us to schedule a demo.

    Book a Demo
Login
Watch a Demo
  • Solutions

    Platform

    • Lease Management Software
    • Lease Accounting Software
    • Artificial Intelligence
    • Assets & Contracts
    • Reporting & Analytics

    Industries

    • Food & Beverage
    • Hair & Beauty
    • Health & Fitness
    • Medtail
    • Petcare
    • Retail

    Services

    • CAM & Tax Reconcilliation
    • Lease Abstraction

    Ready to learn more?

    Watch our 2-minute demo video, or contact us to schedule a demo.

    Book a Demo
  • Resources
    • Blog
    • Customer Stories
    • Guides
    • Webinars
    • Onboarding & Support

    Ready to learn more?

    Watch our 2-minute demo video, or contact us to schedule a demo.

    Book a Demo
  • Pricing
  • Company
    • About
    • Careers
    • Contact
    • Partners & Integrations

    Ready to learn more?

    Watch our 2-minute demo video, or contact us to schedule a demo.

    Book a Demo
  • Login
  • Solutions

    Platform

    • Lease Management Software
    • Lease Accounting Software
    • Artificial Intelligence
    • Assets & Contracts
    • Reporting & Analytics

    Services

    • CAM & Tax Reconcilliation
    • Lease Abstraction

    Industries

    • Food & Beverage
    • Hair & Beauty
    • Health & Fitness
    • Medtail
    • Petcare
    • Retail

    Ready to
    learn more?

    Watch our 2-minute demo video, or contact us to schedule a demo.

    Book a Demo
  • Resources
    • Blog
    • Customer Stories
    • Guides
    • Webinars
    • Onboarding & Support

    Ready to
    learn more?

    Watch our 2-minute demo video, or contact us to schedule a demo.

    Book a Demo
  • Pricing
  • Company
    • About
    • Careers
    • Contact
    • Partners & Integrations

    Ready to
    learn more?

    Watch our 2-minute demo video, or contact us to schedule a demo.

    Book a Demo
  • Login

Commercial Lease Audit Procedures & Best Practices

  • February 28, 2023
  • Michel.Benjamin
Have you audited your leases recently? Now might be the time to ensure you aren't overpaying.

As a commercial tenant, the possibility that your landlord might be over-billing you may not always be front of mind. But it’s a very real possibility—one that can lead to costly disputes that can negatively impact your bottom line and sour relationships.

A commercial lease can contain many provisions that specify costs that are to be passed through to tenants, including, but not limited to, repairs, landscaping, utilities, taxes, and other Common Area Maintenance, or CAM, fees.

Leases are complex documents that often require some decoding. Mistakes in expense calculations and lease language interpretations are common, and when they happen, they often favor landlords.

To ensure that you are paying your fair share of the expenses and are protected from vague language that can potentially favor the landlord, it is recommended to conduct targeted audits based on your needs and concerns.

What Is a Commercial Lease Audit?

A commercial lease audit is an in-depth review of the terms and conditions of a lease, ensuring that each party is adhering to them. These audits are most effective when they target a specific aspect of the lease. Targeting the potential over-billing of CAM & tax charges, or gaps in language related to maintenance obligations, are good examples of effective use of audits.

Who Pays For a Commercial Lease Audit?

Usually, the tenant is responsible for covering the expenses associated with your audit. However, there is potential to arrange an agreement with your landlord where they would reimburse you if you uncover substantial overcharges. In general, a discrepancy in the range of 3 to 5 percent overcharging should be sufficient to trigger your landlord’s obligation to compensate you. Opting for a contingency fee-based auditor, who is compensated based on the savings they identify, can help alleviate concerns about the initial cost. Nevertheless, some landlords may hesitate to engage such auditors due to their known effectiveness.

The commerical lease audits tips and tricks ebook

When to do a Commercial Lease Audit?

Tenants should be mindful of certain events or changes that would serve as the basis for a commercial lease audit. Here are some of the items that could trigger a commercial audit.

If you’re up for renewal, or looking to terminate

  • If you’re up for renewal, an audit could be a good way to review the existing terms of the lease. Maybe you missed something during initial negotiations of the lease that you want to have added. For example, HVAC maintenance is often the responsibility of the tenant. A tenant could have signed a lease without closely scrutinizing the terms, and then dumped a lot of money into an aging unit. Renewal presents an opportunity to clarify any vague language previously agreed upon, or renegotiate critical terms, such as a cap on those pass-through expenses.
  • If you’re looking to terminate your lease, an audit can yield some important insights. Does the lease have a termination clause? Is there a fee involved? What additional expense may be incurred due to TI Allowances of brokerage commissions previously paid?

If there is a change in ownership or property management

  • When a property changes hands, a new owner may interpret some of the terms differently than the prior owner. Prior to signing a potential estoppel related to a change in ownership, it is recommended to conduct an audit of the key terms of the lease as estoppels are legally binding and can potentially amend terms of the lease. Oftentimes different interpretations of lease expiration dates can be addressed and clarified via an estoppel. Or perhaps the previous owner wasn’t strictly enforcing certain terms of the lease. A new owner’s interpretation and enforcement of the contract could lead to charges the tenant may not recognize without an audit.

If you’re looking at acquiring a new business/location(s)

  • When performing acquisitions, it is essential to conduct an audit of the lease files to ensure you are receiving all related documents, and are aware of all of the lease terms and conditions. This supporting documentation will help you determine whether or not to proceed with the acquisition. Do you want to acquire 20 locations where the lease is already expired, or will be expiring soon? Attempting to renew an expired lease post-acquisition can be very challenging, further complicating the acquisition process.

If there are significant changes from the prior year charges

  • Many leases have escalations written into them, and a lot of tenants just blindly pay what they are billed. For more savvy tenants, escalations could prompt an audit to verify those invoices against the terms of the lease.

During triple net reconciliation

  • If your business has a triple net lease, you will receive a reconciliation letter from your landlord roughly toward the end of the first quarter following the end of the calendar year. Due to the complicated nature of CAM charges—and the potential for mistakes—auditing your lease around triple net reconciliation might be a good idea.

When reviewing your documents to determine if you should pursue an audit, keep in mind that your commercial lease may contain clauses that dictate the timing, frequency and duration of commercial lease audits. Additionally, your lease might stipulate where the audit will take place, who is required to pay for it, and who is permitted to perform it.

Preparing for a Commercial Lease Audit

Now that we know when you should consider doing a commercial lease audit, here are some best practices for commercial lease audits. Lease audits when targeted and focused on a specific area. These areas include, but are not limited to, gaps in lease language, financial analysis, or assessing if there is a complete chain of lease-related documents. 

Review the Lease Agreement

Start by thoroughly reviewing the lease agreement to understand the terms and conditions, including rent calculation, common area maintenance (CAM) charges, and any other expenses that are billable to the tenant.

Maintain Accurate Records

Keep detailed records of all lease-related documents, including lease agreements, rent invoices, and receipts for payments. This will serve as a foundation for your audit. If you’re using a lease management platform like Leasecake, this should already be done for you and all your lease data should be accessible.

Confirm Rent Calculations

Double-check that rent calculations are accurate and align with the terms in the lease agreement. Ensure that any escalations are correctly applied.

Verify CAM Charges

Review CAM charges to ensure that the expenses passed on to the tenant are in compliance with the lease terms. Confirm that these charges are reasonable and that you are not overpaying.

Request Supporting Documentation

Ask the landlord for supporting documentation such as invoices, receipts, and other relevant records to verify the expenses being passed on to you.

Verify Percentage Rent

If your lease includes percentage rent, review sales reports and calculations to ensure that you are paying the correct amount based on your revenue.

Maximize your audit by keeping it focused

A commercial lease audit is most effective when targeted and focused on a specific area. These areas include, but are not limited to, gaps in lease language, financial analysis, or assessing if there is a complete chain of lease-related documents. 

At Leasecake, we are detail-oriented and passionate about incorporating audits into our abstraction process. 

During the process of onboarding a new customer, we perform two different audits. We start with a pre-abstraction audit to assess the state of your files in order to identify any missing documents or dates associated with your lease agreement(s). We then follow up with a post-abstraction audit to ensure accuracy of critical dates, rents, and renewal options. 

Would you like to learn more? Let’s schedule a time to connect to show you how Leasecake can make lease management a piece of cake.

Request a demo from Leasecake

Share:

Recent Posts

Get Your Lease Documents Organized Before Due Diligence Hits

Lease Management Isn’t Just About Deadlines—It’s About Strategy, Risk, and Growth

Leasecake Welcomes Jozef Jamrich as Chief Technology Officer to Drive Innovation and Reliability

Your Franchisees Depend on You—Do You Have the Full Lease Picture?

6 Hidden Lease Risks Franchisors Can’t Afford to Ignore

PrevPrevious Blog PostCommercial Lease Renewals: Options, Benefits & Process Considerations
Next Blog PostThe Importance of Co-Tenancy Clauses in RetailNext

Let us help make
lease management
a piece of cake.

Watch a Demo

Let us help make lease management a piece of cake.

Watch a Demo
Linkedin Youtube Vimeo
Solutions
  • Lease Management
  • Lease Accounting
  • Artificial Intelligence
  • Assets & Contracts
  • Reporting
  • Lease Abstraction
Company
  • About
  • Careers
  • Partners
  • Press
  • Contact
Resources
  • Blog
  • Customer Stories
  • Help Center
  • Submit a Ticket
Legal
  • Privacy Policy
  • Terms of Service
  • Cookie Policy
  • Security Overview

Copyright © 2025 Leasecake Inc. All Rights Reserved. Patent Pending