Lease Audit Fundamentals

A lease audit can be defined as the systematic and analytical process by which an individual, the auditor, verifies that the landlord and tenant are both in compliance with their respective contractual rights and obligations as set out in the lease that binds them. As such, the lease audit process therefore requires that the auditor has a keen understanding of the fundamental elements which include the lease, property and property operations, accounting and auditing, etc.

The owner of a commercial real estate property - such as an office building - operates the property. They pay for, provide, or make available various services beneficial to the occupant. These include cleaning, utilities, security, maintenance, insurance, staffing, property taxes, and more. In return, the occupant pays the landlord a fixed rent and its share of the costs of those services and payments.

The details of the owner’s and occupant’s obligations to each other, as well as the services and payments responsibilities, are included in a legal agreement called a lease. The owner is referred to as a landlord or lessor, whereas the occupant is referred to as a tenant or lessee.

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