Lease Structure refers to the structural components of a lease from a lease audit perspective. In certain business law classes, including those classes offered to prospective certified public accountants (CPAs) in preparation for the CPA examination, students learn that a lease agreement is a real estate contract and that real estate contracts must be in writing (unless the existence of the lease or agreement is subsequently verbally confirmed by the parties before a judge) and requires five (5) elements (i.e., [1] legal purpose [can’t be fraudulent], [2] legally competent parties, [3] offer-and-acceptance, [4] consideration/payment and [5] consent) to be considered valid. As such, all references to a Lease herein indicate a valid commercial real estate lease.
For a lease auditor, how the lease content can be categorized is essential to understanding how to navigate a lease, interpret clauses in a lease or apply real estate industry standards during a lease audit engagement. As such, for lease auditing purposes a Lease may be broken into the following five (5) major parts.
- Parties to the Lease
- Premises / Property Details
- Term/Period of the Lease
- Rent and Financial Obligations
- Legal Rights, Obligations and Other Miscellaneous Clauses.
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