You spend time carefully negotiating the real estate tax provisions in your lease to ensure expense pass-throughs will be fair and appropriate, but are you verifying the actual amounts invoiced by your landlord?
Our evaluation of a client’s annual expense statements found that the landlord was calculating real estate tax escalations incorrectly applying fiscal year rates on a calendar year basis, rather than on a fiscal year basis as required per their lease. In addition, the error was further compounded as the client was billed for a full 12-months of real estate tax escalations for the prior calendar year when their lease commenced in July of that year.
Our initial review in October 2021 found that the client was overbilled by $12,000 - $8,400 for 2020 and $3,600 for 2021 real estate taxes.
The landlord then adjusted their calculations and submitted a revised invoice in December 2021 which continued to include errors, overbilling the client by $4,500 - $3,000 for 2020 and $1,500 for 2021 real estate taxes.
Overall, $16,500 in overbillings were identified, a savings of $1.10 PSF for the client.
Suggested process improvement of pro-active review of landlord’s escalation invoices going forward to avoid future overpayments.
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