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Commercial Property Case Study
Unravelling the Gobbledygook in a Commercial Lease Agreement
The client in this case is an educational consultancy with a staff of 35+ consultants operating both in New Zealand and internationally.
The consultancy's finance director called Parallel Directions because their building owner had significantly increased their operating expenses. This added up to thousands of dollars more than expected.
The consultancy was in dispute with its landlord, and refusing to pay its lease until the matter was sorted out. It was uncomfortable being in breach of its commercial lease agreement as it is a government monitored agency.
Every time they sought to get an explanation from the landlord, an international concern, they were presented with what they considered to be "gobbledygook".
Parallel Directions carried out a lease audit and investigated the building owner's reports in detail. They asked some fundamental questions about what was going on.
It turned out the cost of rates and the cost of running a café in the building were not being apportioned fairly among the tenants. There were also some inaccuracies in the true cost of the operating expenses for the building and how they were being passed on to the tenants.
Parallel Directions also discovered the building owners were paying more than they needed to for power. It was suggested the owners could tender their electricity supply and select a supplier with the best deal.
Parallel Directions' investigations benefited both the landlord and the tenant.
The owner conceded the matter could have been handled differently and that they had made some assumptions that proved not to be true. The outcome saw the owner write out a cheque for the lessees, who then met their lease payment obligations. The education consultancy was saved several thousand dollars and the building's owners also benefited by having the operating costs for the building lowered by renegotiating their power supply.
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