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CPI Calculations & Common Errors

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Consumer Price Index rent adjustments are simple to calculate, right? Divide the current index figure by the base index figure to find the percentage increase in CPI, then multiply that percentage by the rent to arrive at the adjusted rent. What could be difficult about this?

You probably know that there is an index - The National CPI (All Items) that is published monthly. It is a broad-based index encompassing the cost of living for approximately 87% of the United States metropolitan population. You are probably aware of the narrower CPI-W (All Items) index that encompasses the cost of living for approximately 32% of the metropolitan population. Did you also know there are CPI-U and CPI-W indices for four regions and 27 major metropolitan areas, some of which are only published semiannually or bimonthly? On top of these confusing choices, add seasonally adjusted indices, old series and new series indices and market indices (food, medical costs, housing and transportation). Not quite so simple now, but the lease language should specify the applicable CPI index.

Last Updated on Thursday, 10 June 2010 12:36 Read more...

Do You Know What Your Electrical Meter is Metering?

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You’ve moved into an upscale office park with all of the perks and amenities that a successful business should enjoy. When your first electricity invoice from the landlord arrives, the amount is higher than you expected. Maybe the local utility’s per kilowatt-hour rate was higher than you projected, maybe the office equipment consumed more electricity than anticipated or maybe the electrical meter is measuring usage on circuits that are not part of your premises.

Has your facility manager ever traced the circuits backwards from the meters or sub meters to the electrical panels, then to the premises, to determine exactly what electrical consumption is being measured? Sometimes even reputable landlords cannot accurately determine what each meter or submeter is measuring until a walk-through inspection is performed.

Last Updated on Thursday, 10 June 2010 12:36 Read more...

Tenant Relations Costs

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What if you threw a party and everyone came? What if you then charged everyone for the cost of that party as well as the cost of the gifts that you gave the attendees? Well, this is exactly what happens when your landlord charges the cost of Tenant Relations through to you in the common area maintenance pool.

Even though many leases have a prohibition against charging “promotional and advertising” costs through to tenants, the landlords attempt to pass through these costs by classifying them as standard costs for a “Class A Building.”

Last Updated on Thursday, 10 June 2010 11:47 Read more...

Negotiation as a Vital Part of the Lease Audit Process

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When most people think of an auditor they envision a man wearing a green eyeshade hunched over a multitude of ledger books with one hand on the adding machine. Rarely does the vision include a skilled negotiator sitting around the table with the landlord trying to work out the best possible solution for all parties.

Negotiation skills are every bit as important to the lease audit process as good accounting techniques and a thorough knowledge of the commercial real estate industry. After all, what is accomplished if noncompliance issues with the lease terms are identified but the associated dollars are not recovered? A successful negotiation results in commitments that satisfy each party’s interests while maintaining a working relationship among the parties.

Last Updated on Thursday, 10 June 2010 12:37 Read more...
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