5 Key Benefits of Third-Party Lease Abstraction
Commercial real estate leases are long and full of legal language for a reason; they are a binding contract between the property owner or property manager and the tenant.
Commercial leases tend to be lengthy documents at times over a hundred pages with addendums, exhibits, and other additions. They do not allow property managers to find the lease terms they need for daily operations quickly. Many commercial real estate companies turn to a third-party lease abstraction service to provide them with a lease abstraction.
What is lease abstraction?
Lease abstraction is a summary of the crucial points covered in the lease regarding the commercial property, property management, tenants' responsibilities, and guarantor's information along with lease dates, terms, and legal descriptions.
Besides, lease abstracts often summarize:
-Lease renewal options
-Termination or Exclusive use clauses
-Tenant refusal options
-Real estate taxes
-Expenses the tenants owe
Why should I get a lease abstraction?
Lease abstractions are valuable to property managers due to the ease of being able to find information quickly. If a problem arises with the property, the loan, the tenant or the manager, the lease abstraction will have the information summarized and available immediately. Property managers will not need to spend hours reading through the entire lease to find one sentence about real estate taxes.
There are 5 key benefits to getting a third-party lease abstraction
#1 Utilizing a team of experts
Third-party lease abstraction services have commercial real estate experts and analysts on their staff. These professionals will free up your time you can use to grow your business. They know what you need from your lease abstraction and will customize each summary for you based on how you will use them. You can request custom summaries for business operations, legal, and financial references. Custom summaries are in formats that are easy to upload into the company's application saving time and money in the lease abstraction process.
It takes time and meticulous attention to detail to produce a proper lease abstraction. You'd be asking a lot of your management team to take on such a time-consuming task. As a result, it can be an expensive undertaking. Relying on your management team doesn't necessarily ensure accuracy. Try as they might, nobody is perfect. They may have training in lease abstraction, but producing abstracts daily, make third-party very efficient in the abstraction process. This saves you money by allowing lease abstraction experts to work for you at a fraction of the cost.
#3 Quick Turnaround Time
When you partner with a third-party lease abstraction provider, you will benefit from a faster turnaround time than having your management company produce a lease abstraction for you. They are incredibly efficient in taking a complex commercial lease and summarizing the key points you need on a daily, weekly, and monthly basis. Their efficiency translates into a short turnaround time for you.
#4 Proper Management
When you equip property managers with the correct documentation, they are better at their jobs and can keep tenants happy. With a proper lease abstraction from a third-party provider, property managers can review lease terms, rates, termination clauses, maintenance requirements, and other exclusive clauses for your property.
Because the lease abstraction is standardized, property managers can look at abstractions for different properties in the portfolio and easily find the information they need. Lease abstractions help property managers keep large property portfolios, generating cash flow, and minimizing turnover.
#5 Accounting Compliance
As you know, there are Financial Accounting Standards reports and disclosures that need to be produced every month for commercial real estate. When you use a third-party, your lease abstraction, the financial summary is created based on those standards. When you work with third-party professionals, you are eliminating the risk of non-compliance and financial repercussions.
When you are searching for a third-party lease abstraction provider, consider the Clik Servicing Hub. Our commercial real estate analysts are experts in CRE lease abstractions, lease audits, financial modeling, automated underwriting, and much more. Visit our Services Hub today.