According to Commercial Real Estate Group of Tucson, commercial tenants have received their 2009 expense reconciliation statements of operating expenses and taxes from their landlords. Typically, you have 30-60 days after receiving these statements to give notice to the landlord if you wish to perform an audit. If renting office space, industrial space, warehouse or other commercial real estate, now is the time to inquire if your landlord is over-billing your company; an audit may save you substantial sums of money over your lease term. For many commercial real estate tenants, rent is your second largest operating expense after personnel costs. Auditing the landlord’s expenses provides confidence that you are being properly billed. Not all tenants should audit their lease expenses annually, but here’s a general analysis of some leases that may make excellent audit candidates: If a gross-lease was executed in 2009 you will only one have opportunity to audit the base year (2009) expenses; if you waive this right then you may be over-billed for all ensuing years due to a landlord understating the base year expenses. Even a net-lease signed in 2009, while these don’t have a base year from a dollar amount, should consider an audit to verify that you’re only being charged permitted expenses. Landlords of mixed-use properties routinely overcharge tenants for operating expenses and real estate taxes, because the landlord allocates expenses to the various components of the complex using methods which don’t reflect the actual usage of services by each component. Substantial operating expense increases often signals that a landlord has improperly calculated the expenses. A tenant should look at specific line items of expense when reviewing the year-to-year increases. Buildings in which landlords have expended major capital on building systems, exteriors or common areas certainly should be considered as an audit target; your lease dictates if such capital expenditures are permissible. The gross-up of expenses is addressed in most leases and if applied properly is fair to both the tenant and the landlord. When a building has high vacancy, a landlord can make significant errors when applying this gross-up adjustment which negatively impact a tenant’s share of the annual operating expenses, resulting in the tenant paying too much. Please consider ITRA/Commercial Real Estate Groups consultant Paul Stevens two-decades of experience a resource; if you would like a review of lease and operating expenses, and determine the appropriateness of an audit, please contact us. ITRA/Commercial Real Estate Group is a leading regional, national and international corporate real estate advisory firm exclusively serving the needs of industrial space, warehouse, office and retail tenants. For more information call Michael Coretz at 520-299-3400 or visit out website, www.cretucson.com.