Resources and tips
How to control your expenses in a rising market?
Watch the cost and the profits will take care of themselves – so true but how do you do that in a market where prices are seemingly constantly rising? Rent is one of the biggest expense a company has and while base rent is clearly negotiated and spelled out in the Lease, the operating expenses, utilities and the property tax are subject to each individual property owner operating and accounting procedures and there are no standardized rules to regulate them. It is important, as a business owner, to stay educated and aware of the potential cost increases so you are not be surprised later and here are some of the tips:
Operating Expenses
Property owners constantly invest in their properties by improving certain common facilities, services, ultimately increasing the overall value of their property. At the end of the day, someone is paying for that and most of the time is the tenant. When considering a building, it is essential to understand your lease, the operating costs you are responsible for and the expenses you are not responsible to pay as well as how expenses may change during your tenancy.
Property Taxes
We all pay our share of it however keep in mind that a new building will most likely mean a very high real estate tax bill and the sale of a building will most likely trigger a reevaluation and assessment resulting in an increased tax bill. The best thing you can do is to stay informed so you are aware of any increases coming around. Another area you should pay attention and stay informed is the tax appeal. Property owners often appeal the tax expense and the tenants pay for the cost of it year after year. Once the tax appeal board has reassessed the building’s value, reducing it from the original amount, a tax credit is issued to the property owner by the taxing authorities, which amount should be divided between the tenants. As you attempt to increase productivity through different means such as consolidating their administrative staffs or reducing your space needs, you should take advantage of outside services that increase efficiency and help control costs.
Lease Advisory and Audit is one of these services and has become an integral part of many companies’ internal control procedures. This should not be surprising, considering the millions of dollars that commercial tenants have saved over the last decade because of lease auditing. Lease Audit fits perfectly into any company’s cost-containment program. It does not change the way by which the company does business nor changes lease transactions all parties involved have worked hard to complete.