eCopy had a base year structured lease requiring it to pay for its share of increases in operating costs and also to pay for the cost of all electricity consumed within its premises. When the building’s landlord, who occupied the rest of the building, sent eCopy its first reconciliation statement for operating expenses and electricity charges, eCopy received an unpleasant surprise: the costs were much higher than budgeted and the landlord did not have reasonable justifications for the increases. When eCopy called their broker he recommended eCopy have CyberLease perform a Preliminary Review to determine if an in-depth audit was justified. The Preliminary Review found several “red-flags” that warranted an audit and eCopy hired CyberLease to audit the landlord’s records.

The audit found two major problems. First, the electricity costs were being billed to eCopy based upon its proportionate share of the building’s square footage, but they included significant costs for electricity consumed in the landlord’s large computer server room / data center. Second, the base building / common area electric costs were also included in eCopy’s premises electricity charges rather than being included in the operating expenses, thereby depriving eCopy of its base year offset against those base building electric costs. The result of this audit saved eCopy more than $670,000 – or the equivalent of $25.15 per square foot – over the term of the lease!

Two years later, the electricity expenses had increased and we were again concerned about the accuracy of the landlord’s billings. CyberLease performed an audit of those subsequent two years and found the landlord had increased its electric consumption in its own premises as a result of adding additional equipment. The change in operations should have triggered a reallocation of those costs based on the settlement of the first audit. This second audit saved eCopy another $60,000, or $2.25 per square foot.

The example of multiple audits of eCopy’s lease is a great reminder of the need to be diligent in your efforts to reduce and control your rental costs.