It is the beginning of a new year and you just received the landlord’s building expense pass through reconciliation for the previous year. Assuming the math is correct, what are the two most important things to look for?
When reviewing the landlord's building expense pass through reconciliation for the previous year, there are two key things that you should pay close attention to:
1. Accuracy of Expenses: Verify if the expenses listed in the pass-through reconciliation align with the terms stated in your lease agreement. Ensure that all the expenses claimed by the landlord are valid and permissible under the terms of your lease. This includes checking if the expenses are categorized correctly (e.g., maintenance, repairs, utilities, insurance, etc.) and if the amounts charged are in line with what was agreed upon.
To assess the accuracy of expenses, follow these steps:
a. Compare the expense categories listed in the reconciliation with those specified in your lease agreement.
b. Cross-reference the expenses mentioned with the supporting documentation, such as invoices and receipts, provided by the landlord.
c. Make sure that all the expenses are itemized and clearly explained, leaving no room for ambiguity.
If you find any discrepancies or items that seem unreasonable or unsupported, it is important to address them with your landlord.
2. Proper Allocation: Check if the expenses have been allocated proportionately and fairly among all the tenants in the building. The pass-through reconciliation should clearly outline the methodology used to allocate expenses, and it is important for you to ensure that this methodology is reasonable and complies with the terms of your lease.
To review the proper allocation of expenses, follow these steps:
a. Understand the allocation formulas mentioned in your lease agreement. These could be based on factors such as square footage, number of units, or any other predetermined criteria.
b. Check if the allocated expenses have been calculated correctly, using the appropriate formulas as specified in the lease agreement.
c. Verify that the total expenses allocated to all tenants equals the total expenses claimed by the landlord.
If you identify any issues related to expense allocation, such as incorrect calculations or improper application of the agreed-upon methodology, bring them to the attention of your landlord for clarification and resolution.
By thoroughly reviewing the accuracy of expenses and ensuring proper allocation, you can protect yourself from being overcharged and maintain a fair and transparent landlord-tenant relationship.