Commercial Real Estate Investment/Reasonable Audit Fees


If a tenant audits the Landlord's operating expenses and the lease allows the tenant to charge the Landlord reasonable audit fee, is there a percentage used or considered to be reasonable?


Good question.  I do not know what the "correct" answer would be.  Consider the following suggestions.

The standard is probably related to "generally accepted (auditing) practices in your market area".

I suggest that you contact a dozen CPA's and Lease Expense Audit practitioners in your area to come up with what a "reasonable" fee should be. (Note: keep good notes on your findings, especially the names of the people that give you what their own or their firms charge.)

It may be wise to determine the difference between what a a pure CPA would charge for the audit (probably an hourly fee plus an estimate of the total hours required) and the charge a commercial real estate industry "Lease Expense Auditor" would charge - likely a percentage of the reduced expense.  

I am familiar with the different processes employed by both kinds of practitioners.  Although both are similar in some of their methods, they are also quite different in other ways. Perhaps the most notable difference is in approach.  I have seen good things from professional accounting methodology and the property management industry practice orientation.  Success depends more on the level of experience, integrity and savvy of the individual that does the work.

It may also be wise to discover if the tenant's lease stipulates that a CPA must do the audit (most leases do make such stipulation)and if a CPA is not stipulated, if the local courts or legal associations have an opinion regarding the use of a CPA or Lease Expense Auditor.

Good luck.

- Jim  

Commercial Real Estate Investment

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Jim Avancena, CPM


Best qualified to answer questions that involve commercial leases, that is, basic issues as well as the often unexpected effects of the complexities and inter-relationships of the provisions a lease may contain, explain how seemingly innocuous text in your lease can have a major impact on a Tenant or Landlord and their business operations, and the common practices utilized in the industry. I can untangle most matters that may come up from the time a tenant begins searching for a office or store space and the lease acquisition process, concerns related to remodeling/improving the leased premises, moving-in, subletting or assigning the leased space, and a long list of problems that may come up during the lease term and even after a tenant moves out. I have practical experience with most property management issues and resolving landlord and tenant disputes - especially those involving what may appear to be overcharges assessed for additional lease charges like CAM costs, operating expense reimbursement, real estate taxes, utilities, construction improvements etc. Note that I am not an attorney and cannot provide legal advice.


Thirty years active experience in the commercial real estate industry as a licensed real estate broker in the Washington DC Metro area (DC, Northern Virginia & Maryland). I have been admitted (approved) by the Maryland and DC courts to testify as an expert witness on the subjects of Commercial Leasing and Property Management in the area of standard industry practices. I have had a business for the last 14 years advising virtually every form of business entity from large national corporations to the smallest ma & pa new businesses regarding a wide range of commercial real estate matters in addition to property management and commercial leasing.

Currently my three children keep me so busy that it is difficult to participate in organizations with continuing and specific time requirements.

I publish a local commercial real estate newsletter titled: "Tenants First". My firm was the subject of a high profile Washington Post business section cover page (2.25 full pages) feature story on January 13, 1993; titled "Overcharging Overhead".

BA in Political Science from Memphis University, and five years of study in the real estate development summer program at MIT. I was certified as a commercial property manager (CPM-IREM), and currently hold a brokers license in Maryland and the District of Columbia.

Awards and Honors
The same plaques and honors that most others in my industry have earned. I have none that I consider especially meaningful.

Past/Present Clients
Past clients include: The World Bank, George Washington University, National Association of Criminal Defense Attorneys, US Department of Commerce, The American Benefits Council, K-Mart Development, many law firms, a national union, other major organizations, and many, many small business firms and retail operators that I am most honored to serve. I estimate more than 1,500 firms/organizations.

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