Real estate costs are one of the single biggest overhead items for most commercial tenants. Yet tenants are commonly advised by landlord brokers with serious conflicts of interest -- fiduciary obligations to help landlords maximize lease costs. The result has often been transactions which aggravate costs, embarrass executives and sometimes even sink a company.

     The toughest part of securing a good deal isn't finding the right location, since landlords are obviously eager to let all brokers know about their available space and rent it as soon as possible. Rather, the toughest part of securing a great deal is negotiating the lease. A badly-negotiated lease can turn a great location into a terrible liability.

     Nobody negotiates stronger leases for tenants than Commercial Tenant Real Estate Representation, Ltd. We are the only tenant representative which both negotiates leases and comprehensively audits landlord billings. We actually inspect the general ledgers, invoice files and vendor contracts of almost every major landlord in the New York area, plus other major commercial landlords across the United States. We see first-hand how many landlords evade negotiated lease terms, and we have built up a data base -- perhaps unique in the industry -- which helps us negotiate strong protection for tenants.

     Altogether, on a tenant's behalf, we go beyond other brokers -- and law firms, accounting firms and consultants -- to offer a unique combination of expertise in real estate markets, expertise in real estate law, expertise in building operating systems, expertise in real estate taxes, expertise in landlord accounting practices, expertise in lease negotiation and, when necessary, expertise in real estate arbitration and litigation. We have represented Fortune 500 tenants and law firms with total lease obligations over $3,000,000,000.

     We can help your company cut occupancy costs, better protect your long term interests and build competitive advantage.

Over the years, in conjunction with negotiating transactions, we've analyzed several hundred leases for U.S. and multi-national corporations. About 80% of these leases contain at least one badly flawed term which imposes significant costs out of proportion to any benefit the tenant might get. Problem leases are especially serious as competition puts pressure on companies to cut costs and improve productivity.

     How can such costly mistakes occur when companies have their leases reviewed by major law firms and brokerage firms? Lawyers are trained to check the legal aspects of a real estate transaction, but the trickiest clauses tend to involve business issues with which lawyers typically have little practical experience. For instance, the cost implications of different building systems, practical implications of escalation formulas, design firm and contractor bidding practices, methods of pricing landlord services, and how a landlord's accounting methods can add costs for your company.

     Some business issues which affect your company's costs become evident only after inspecting the building site, but lawyers rarely do. For instance, we were negotiating a lease with one of the country's largest law firms which represented a particular New York landlord. His lawyer repeatedly gave us documents trying to make the tenant responsible for elevator maintenance. We asked why. The lawyer said it was standard practice. But, we replied, this is a one-story building. It doesn't have an elevator. The lawyer had no idea, because he doesn't visit buildings. Like too many other lawyers, he's been taught that certain things are "standard." "Standard" forms are tools of the trade. Too often the "standard" is drafted to protect building ownership and has no relationship to your specific business needs or the terms of the transaction you negotiated.

     Almost all real estate brokerage firms earn the great bulk of their income representing landlords as building agents. They're marketing machines for landlords. It's the job of these landlord brokers to put money in a landlord's pocket. If a landlord says that to meet his mortgage payment she needs rent no lower than X, an escalation formula no lower than Y and a workletter no higher than Z -- that's what the brokerage firm must strive to bring in. This is perfectly proper, of course, but it doesn't benefit you. Landlord brokers aren't paid to take apart a lease, challenge the landlord's proposal, identify contingent costs, and negotiate the best transaction for your company.

     The compensation of a landlord broker is tied to specific buildings where the brokerage firm has agencies. Such a broker gets no commission if a tenant decides its interests are best served at a building represented by another landlord broker. They're paid only if they get tenants to sign leases in specific buildings their landlords own. And, when a tenant does sign a lease in these buildings, they're paid even if they have no involvement in the transaction. Their allegiance is to the landlord and the building.

     Brokers who make money representing landlords naturally seek more of this business, which means earning the landlord's favor. Landlords tend to know which brokers are most loyal to their interests. A broker can't expose profit centers in a landlord's lease during a negotiation on Monday, then credibly court him on Wednesday. Landlords don't hire building agents who put tenants first.

     Obviously, the more building agencies a brokerage firm has, the stronger its commitment to landlords. How can such a landlord broker ever put tenants first?

     With millions of dollars at stake, why would a responsible corporate expecutive knowingly choose to be represented by a landlord broker?

     To protect your firm's long-term interests, a broker must be free from landlords' influence. The way to do this is to forego representing landlords.

Because Commercial Tenant Real Estate Representation represents tenants exclusively and never promotes space for landldords, we can single-mindedly negotiate for a market-rate transaction, tailored to your business needs rather than the needs of a landlord.

     When a business retains us as their exclusive agent, we start by helping them translate their business requirements into real estate terms.

     We next conduct a comprehensive market survey using computerized databases, current canvassing data and other information to identify all available locations which suit your physical, financial, operational and geographic criteria. For especially tough tenant requirements, where what's currently on the market doesn't satisfy your needs, our market knowledge enables us to go beyond current availabilities to create solutions for you.

     Before offering a site to you, even one we're familiar with, we inspect it to determine that it retains its suitable characteristics, and that requirements unique to your business can be satisfied by this location.

     Our report to you details physical characteristics of the site -- good and bad, relative financial attractiveness compared to other offerings, landlords' performance characteristics where relevant, and other information to help you analyze your options.

     Our market surveys are a diagnostic tool, not a sales pitch. We help your business select the site most suitable for your business needs -- whether it's in a different city, different state, or two blocks from your current location. We include your current location in our search and analysis to advise you if staying put will best serve your needs.

     Once our market surveys, analyses and site inspections have narrowed the focus to two or three preferred locations (in a typical transaction), we negotiate the economic terms intensively. Using historical data, information about a building's operating and management characteristics, aspects of your business operations which affect costs, knowledge of taxes, utility costs, regulatory costs and other information, we prepare financial analyzes showing the likely relative costs at each location you are considering. We examine each situation for ways costs can be reduced while achieving your objectives. We use the power of alternatives to maximize the value you receive at each location under consideration. After weeks -- or months, depending on the transaction's complexity -- of analysis, negotiation, analysis, and negotiation, we are able to secure landlord agreement on the financial outlines of a transaction which will achieve your business goals.

     With a site selected, we aggressively negotiate each term of the lease or other transaction you've commissioned us to handle. We negotiate fixed costs, expense thresholds, escalation formulas, tax liabilities, contingent costs and responsibilities, landlord services, extension, expansion, cancellation, and financing options. We next craft effective enforcement mechanisms to protect what you bargained for.

     We also negotiate all financial aspects of your build-out -- often worth several years' rent if handled properly.

     We can help your business select a design firm and a building contractor, then structure agreements with these vendors to minimize your company's costs.

     With a lease signed and construction started, we make non-technical inspections of the job site to see that your company gets what we bargained for. Things like the kind of light fixtures you specified, the right number of electrical outlets, that demolition, temporary power and security costs are billed correctly.

     After your company moves in, we provide additional services to protect your bottom line. We analyze bills you receive from your landlord, verify charges using independent third party data and our own databases. We inspect the landlord's books when necessary, to make sure you're paying only what your lease requires. If we determine that you've been overbilled, we negotiate a refund and revised billing procedures to protect you in the future.

     For tenants with large portfolios, we advise on lease administration. Identifying, monitoring and acting on lease information that's critical to reducing costs and maximizing the value of corporate real estate commitments.

     A good tenant representative can push hard to cut costs, even when a landlord claims a "walk point" is involved. By contrast, a landlord's agent isn't in a position to even raise these issues, much less challenge the building owner.

     Often, representing a business aggressively means taking heat from a landlord. In one lease negotiation, for example, the landlord presented a so-called "standard" lease -- drafted by a landlord trade group -- to which he had added 15 additional pages specifically drafted to protect his interests. Many of these shifted costs unreasonably to our tenant.

We challenged the landlord's "standard" and added many terms of our own. We eliminated hidden costs, shifted the risk of market changes back to the landlord, provided flexibility for the tenant's business, safeguards to protect their construction money, meaningful limitations on charges the landlord claimed a right to bill, enforceable deadlines by which the landlord had to perform key tasks, and market-rate financial terms.

     The landlord tried stalling tactics. He repeatedly refused to meet, saying his lawyer would respond. But his lawyer told us she didn't know the terms and wasn't authorized to handle business points. After weeks of this, we insisted on a face-to-face meeting with the stone-walling landlord, in the tenant's presence. The landlord started with a winning-through-intimidation tactic, declaring, "I've never seen a mark-up with so much baloney in it." This landlord, like many, figured that with enough bluster he could scare the tenant into acquiescing. But we had prepared our client well. We didn't need to respond in kind. We demonstrated the financial implications of the various contingent costs, the government regulations, escalation charges and other costs the landlord was trying to foist on the tenant. We showed how just one of his proposals would result in an increase of nearly $1 per square foot in base rent before the tenant even moved in. We showed how his "standard" language would wipe out our client's discretion in handling many business matters. The landlord had to concede point after point, and we saved this tenant hundreds of thousands of dollars. It's inconceivable any landlord broker would champion a tenant's interests in this way.

     As you can see, because Commercial Tenant Real Estate Representation Ltd. serves tenants exclusively, we avoid the conflict-of-interest facing landlord brokers who claim to work for tenants.

• We search for the site that best satisfies your requirements. We show you everything so you can decide.

• Our loyalty is to you, our client, not to any particular landlord. Our compensation is the same, wherever a client decides to locate, and we're compensated only when your business needs are satisfied.

• We are completely free to shop the market for your company and negotiate for your company's interests, letting landlords fend for themselves.

• Our commitment is to you, not a quick transaction. When need arises, we advise tenants to move on and pursue alternatives until we have clearly achieved the most advantageous terms available.

     We have no ax to grind against landlords as such. Indeed, in testimony for New York City's Comptroller, we strongly recommended cutting real estate taxes. We favor abolishing rent controls, because they violate private property rights, perpetuate New York City's housing shortage and undermine the soundness of financial institutions. Landlords perform a vital role assuming entrepreneurial risks and creating more choice for tenants.

     Our point is that when your business needs to satisfy its real estate needs, you require single-minded tenant representation to negotiate effectively with landlords. They know the financial and operational importance of every detail of a real estate lease, and have long surrounded themselves with loyal, specialized advisors who negotiate for maximum advantage in every situation. It's impossible for the same brokerage firm to serve both landlords and tenants without a crippling conflict of interest.

While the impressive size of the biggest brokerage firms seems to make many corporate executives feel comfortable, size doesn't do you much good. It's substantially dedicated to serving landlords as building agents. Nor does a large brokerage team or committee help protect your interests in lease negotiations. What counts is the competence and tenant loyalty of the specific individual who will actually negotiate one-on-one for you with the landlord.

     Here's a situation which shows how valuable exclusive tenant representation can be. We negotiated a Manhattan lease extension for a global media company. The transaction included a $500,000 build-out contribution from building ownership. The landlord anticipated amortizing this over the 5-year lease term. Two years later, we came back to renegotiate the lease. At this point, the landlord had amortized only 40%, or $200,000 of their build-out contribution. So right away, we faced a hurdle -- the landlord would see himself losing the benefit of the unamortized portion, or $300,000.

     Part of the trick in this situation was getting the landlord and tenant to talk. Despite the relatively long time remaining on their lease, the tenant had viable options outside this building. The landlord wanted the tenant to stay, and liked the prospect of the tenant committing to a longer term. But, he felt he was being taken advantage of, since by renegotiating early in the term and putting out more cash, he would lose 60% of the half-million-dollar capital investment he'd just made. To complicate matters, he also claimed that the tenant hadn't fulfilled all of their lease obligations.

     The tenant, for their part, would benefit from a longer commitment to the building. They'd spent a lot of money on improvements in addition to what the landlord had provided. The nature of their operations required additional expenditures. Moving out to accomplish their current objectives would be costly. However, they resented the landlord taking advantage of their disinclination to move by demanding premium -- not market rate -- rent in a soft and declining market. In addition, the tenant complained that the landlord hadn't provided all the services he had promised.

     So there was bad blood on both sides, and the tenant's lease had significant time to run. It looked like the landlord had the upper hand.

     It would be easy for this situation to stalemate. But by using our knowledge of lease dynamics and landlord motivation, we structured a win-win situation. For the company we represented, we won a rent reduction of $5 per square foot, reduced escalation charges, an additional workletter contribution of $250,000, and attractively priced expansion options.

How we put pressure on landlords

     A major Manhattan institution wanted a 100,000 square foot location close to Amtrak. We analyzed the possibilities in several geographic areas, starting with about 20 buildings near Grand Central Station. After several months of site inspection, financial analysis and negotiation on multiple sites, a landlord accepted our terms. Leases were drawn. Then, the institutional landlord stalled and tried to change key terms. The owner's Executive Vice President claimed their leasing agents -- some of the most senior in the business -- didn't have authority to speak for them. We pressed the landlord to honor his agreement and perform, but he believed the market was in his favor.

     We counseled our client to move on.

     Another landlord tried the same tactic. After weeks of negotiation, they had leases drawn, then tried to change key terms, hoping verbal bluster and the momentum of the deal would cause our client to cave in. Again, we advised our client to walk.

     Ultimately, we satisfied the tenant's business requirements at a lower price in an advantageous location, and gained them more flexibility. The lease we negotiated has become a model for their other requirements.

     Or take the case of an institutional client which wanted a special-use building, but could sign a lease for a maximum of only 10 years. Nothing existed in the location they specified. After months of site searches by foot and car, we found an ideal location along a highway. The building on the site had been reduced to a brick shell, so we needed a developer to completely rebuild the interior and put on a new roof, façade, new electrical, plumbing, and air conducting systems. Because the market was strong, several developers we qualified weren't interested in a competitive RFP. Of those who were willing to compete, a majority insisted on fully amortizing their costs over the tenant's 10-year lease. This would reduce the developers' risk, but rents would be unacceptably high.

     How to reduce the tenant's rent? We found additional developers. We asked each for several proposals and analyzed in detail the two which seemed to offer the lowest cost. Our analysis showed that the developer whose proposal initially looked lower would actually cost more within just a few years. If our client renewed at this site, as is typical in their operations -- total costs would have been about $15 per square foot higher by year 11. We negotiated a satisfactory lease with the second developer. Initial costs are market rate. The tenant gets a new, build-to-suit with no capital outlay. Long-term costs are locked in too; the rent for the renewal term is fixed. This is a considerable benefit, since the tenant incurs no market risk. If they find the renewal rate is unfavorable, they can walk or renegotiate.

     We negotiate so aggressively for tenants that we're often able to get important concessions few others achieve.

     Because we have no conflict of interest, we can make it our goal to structure, from the ground up, a lease that protects your company

     Consider so-called "escalation charges" as an example. These are the real estate taxes, operating expenses, porters wage increases and other charges which increase your occupancy costs throughout your lease term. Since these charges can literally double your rent, the amount at stake is substantial.

     Would your company always know which combinations of charges are market rate? Which indices offer savings compared to operating expenses? Which will actually increase your operating expenses?

     Landlords often treat escalation charges as a slush fund. They propose leases carefully designed to let them charge their tenants whatever it takes t run a building -- plus a whole lot more. To preserve their discretion, landlords make it a practice to give you little information about the charges they bill you. Many times, tenants receive escalation bills for several million dollars with only an abbreviated 10-12 line item statement as justification.

     We insist on effective cost controls for tenants. We start with the premise that since your company is paying the bill, you should be able to limit the billable costs and verify them. 

When we negotiate operating expenses on behalf of your company -- one of the trickiest areas for a tenant -- we limit what a landlord can bill to what it really takes to run a building.

     We know about the nuts and bolts of how a building runs. We know how accounting treatments and standards can turn seemingly even-handed proposals to your disadvantage. We know what the words in a lease actually mean -- in terms of discretion, industry practice and creative accounting opportunities -- when your landlord compiles his annual expense statement. Sometimes legal knowledge is required, and we have that.

     When we look at the operating expense terms a landlord proposes, right away we know whether it will permit them to inflate true operating costs, get away with substantial markups, double-billings and other budget-busters. We insist on specific protection against all improper charges.

     In a recent lease negotiation for a client, we rejected operating expense terms proposed by one of the country's largest developers. Our experience told us it would obligate the tenant to pay for significant charges which weren't operating costs, and allow the landlord to shift his business risks to our client. The landlord brought in his head of operations to defend their proposal. This man had worked 20 years for one of the country's largest landlord brokers, but he had to acknowledge the points we raised. Negotiations continued for several weeks -- we repeatedly rejected inadequate "compromises" proposed by the landlord. Finally, this major developer agreed to terms which eliminate improper and excessive charges, give our client the ability to verify the landlord's performance, and important self-help protections.

     To help you control costs, we go well beyond the obvious money clauses like rent and certain escalation charges. We also negotiate to minimize contingent costs and to maximize your company's flexibility. Can this really be worth money to a business? You bet. We saved one company money by anticipating the landlord's need to make physical changes at a building. In another situation, we saved the tenant money by anticipating their changing business requirements.

     Commercial leases are typically very specific about your company's obligations, but vague about what a landlord must do. The result is that because your company has made a long-term financial commitment, and transaction costs to modify lease terms are high -- if the lease permits any modification -- bjusinesses like yours often have no ability to control the qualify of building services for which you pay 5%, 10% or more of your rent -- perhaps millions of dollars a year. Even a company which is the sole or major tenant in a building can find itself in this situation.

     Consider a perennial trouble spot. Most businesses accept a landlord's cleaning service as part of a standard package even though this may account for 10% or more of your base rent. Such an arrangement usually means you have no recourse if cleaning service is inadequate. Yet poor cleaning is one of the most common employee complaints, according to the Wall Street Journal. For this, and similar situations, we negotiate clear, detailed performance standards. We also limit the landlord's ability to bill for "extra" services.

     Other areas we commonly focus on to eliminate excessive costs are sundry services, alterations and improvements, passenger and freight elevator service, landlord's fees for supervision, and professional services. In some of these categories, the savings from a properly negotiated lease are tens of thousands of dollars a year for a modest leasehold. We go a step further, too, and negotiate to give your company a cost effective remedy if the landlord fails to perform as agreed.

     The leases most businesses agree to sign are loaded with provisions which shift responsibility from landlord to tenant. This probably includes your lease. In case of a flood, sustained power outage, mortgage refinancing, change in laws, different kind of tenant coming into the building, you name it -- the lease is structured so the landlord will have all the flexibility, and businesses like yours will pay all the extra costs.

     One common landlord tactic has cost tenants untold millions and millions of dollars. Nation-wide, leases typically stipulate the landlord is in no way responsible for the quantity or quality of electricity supplied to the premises. This is so even when the landlord acts as vendor and resells electricity at a substantial markup.

     We've seen this provision even in leases for major law firms occupying 400,000 square feet and more of space. It means the tenant -- your business -- bears 100% of the risk if power goes out. Lease terms like this also enable landlords to borrow power from one tenant and give it to another. The tenant becomes responsible for millions of dollars in payments, but has no guarantee their business will get even minimally usable space in return.

     We negotiated with one landlord for months about electricity. As we resolved various points in the lease, they insisted the tenant would have to pay full rent even if no electricity could be delivered to their space. Invoking a common landlord tactic, he claimed his lender wouldn't agree to anything else. This, he said, was a "walk point." Well, from our point of view, your company isn't there to pay the landlord's mortgage. You need functional space for business. We insisted our client wasn't going to be in a position of paying rent for years on space they couldn't use. By having a clear grasp of how the words on paper could affect our client's business, and by relentlessly challenging the landlord's posturing, we prevailed. Ultimately, we negotiated lease terms that gave our client substantial economic protection and continuing leverage to make sure the landlord performs properly.

Additional protections needed for tenants

• When a landlord must provide ongoing services during a lease term, we specify objective and ascertainable performance standards. Where appropriate, we tailor them to your business needs.

• For situations when significant money or performance is involved, we make sure you have a cost-effective remedy. This requires a sufficient understanding of your business, lease dynamics, real estate markets and landlord motivation to anticipate critical situations when conflicts may arise. Different conflicts which may arise require different solutions. Cookie-cutter solutions and standard language don't do the trick.

• We structure a lease which prohibits the landlord from passing along improper costs. Without effective protection, you can be hit with budget-busters as the result of additional taxes, new laws, sale of a building, refinancing, and dozens of other things which have no relationship to the space you occupy or services you negotiated for.

• We negotiate leases to prevent landlords from shifting their business risks and costs to your company. This often requires anticipating an undisclosed cost and specifying how it should be handled. Or for situations which can't be anticipated, specifying solutions which give your business needed flexibility.

• We minimize so-called "hold up" risk by providing procedures which limit landlord discretion, and by carving out areas where you can operate free from landlord oversight. Costly hold-ups routinely occur when something you need -- like a modified office layout or more electricity -- requires the landlord's approval. With a weak lease, you're often backed in to trading-off unrelated, valuable items to get what you need now.

     A landlord's contribution to your tenant buildout -- partitions, doors, carpeting, lighting -- is often called a workletter. The "workletter" can provide for a cash contribution, obligate the landlord to supply a specific quantity and quality of building materials or require him to actually construct your interior improvements.

     Whichever form, the workletter is a major economic factor in most office leases. Getting full value requires detailed attention to this aspect of the negotiations. Especially when you have a landlord build your space, you invite a complex, potentially costly relationship that has to be negotiated as carefully as your lease itself. And, in every form of "workletter," the construction process -- even if done by your own people -- sets up a complex interrelation between you, the landlord, the physical structure, and third parties, where costs mount rapidly and responsibilities are too often ill-defined. The result: a product you aren't satisfied with, costly delays, budget overruns. Most companies inadvertently set themselves up for these problems by focusing on the stated dollar value of a workletter and overlooking other important issues.

     For example, landlords often require that cash they contribute to a tenant's buildout be spent within a short period of time and only on "hard costs." This means things like doors, walls and lighting fixtures -- capital improvements which will enhance the landlord's building. But "hard costs" are often only about 50% of total project costs. Who will pay your fees for the lawyers, architects, electrical engineers, mechanical engineers, lighting designer and government permits? If the landlord succeeds in preventing your company from applying the workletter to these and other essential "soft costs," your business could be out-of-pocket for much more than you budgeted.

     We recall a landlord who proposed a $400,000 workletter contribution with several provisos for a multi-national communications company which was expanding within their building. The landlord's lease stipulated that all the money had to be spent within six months on "hard costs." Translated: the tenant was being put in an all-or-nothing sdituation. If the tenant's hard-cost requirements amounted to say, only $350,000, the landlord would have no obligation to reimburse them for anything.

     Our first step was to change this. Under the terms we negotiated, the landlord would be obligated to promptly reimburse the tenant for any sum up to $400,000. This improved the tenant's situation, but it still left money on the table. If work the tenant required cost less than $400,000 in total, the landlord would get to keep the difference, even though the full $400,000 contribution was a key inducement for the tenant to sign. To make sure they got the full benefit, we negotiated an agreement that the tenant would get both whatever they actually spent -- say $350,000 -- and the remaining $50,000 balance as a rent credit or cash payment -- at our client's election.

     Next, we increased the workletter's value to this tenant by negotiating additional flexibility. We got the landlord to agree the tenant could spend the money on practically anything related to their space including architectural fees, engineering fees, and even furniture. Furniture is quite an unusual concession, since a tenant can remove it. It serves you only and doesn't enhance the value of the landlord's building.

     Finally, we negotiated more time for the tenant: they have two years, not six month, to spend the workletter money. This gives them time to experiment with how they best use the space -- and the $400,000 -- instead of rushing a capital spending plan to meet the landlord's artificial 6-month deadline.

As with the lease itself, restrictions on nominal money terms are only one way the value you bargain for is often eviscerated.

     Most landlord leases impose layers of costly restrictions on how even the largest companies can get their space built out. For instance, who can do the work; when can it be done; how can it be done, and aspects of interior and common area design. Each control increases the opportunity for building ownership to add cost without adding value, and to use these controls to defeat other rights you have bargained for. Sometimes landlords call for additional management or supervisory fees -- on top of the markups you're already paying. Commercial Tenant Real Estate Representation Ltd. knows which limitations are reasonable and which invite hold-ups.

     We negotiate flexibility to protect your company. For instance, landlords often demand a tenant use their general contractor and specified sub-contractors when the tenant builds out space. This virtually eliminates your ability to control costs and means, despite contractual formalities, that the contractor is working for the landlord not for you. We protect your business against back-door cost increases, enabling you to select contractors and competitively bid a job. We limit landlords' rights of approval, preventing hold-ups and costly delays. And, we negotiate effective enforcement mechanisms.

     Most brokers and consultants are history once a tenant's signature is on the page. But the transaction isn't finished then by any means. How does your firm know it will get what it bargained for?

     Actual construction costs can differ substantially from what a business forecasts and even from a contracted budget amount. Construction contracts are notorious for loopholes. Field conditions, change-work, and substitutions can add 20%, 30%, 50% or more to what you thought you'd pay. Frequently, the landlord's tabulations of costs is one-sided. Take a $650,000 workletter we recently negotiated for a tenant. It was tied-in to detailed contract drawings and provided for an attractive, but not fancy, tenant installation, all within the budget provided by the lease. The landlord was responsible for getting the space built out. The tenant had to pay extra costs if they asked for something fancier or required changes as the job went along. After the space was built, the landlord presented his reconciliation -- a $280,000 bill of "extras" which he claimed the tenant was obligated to pay for.

     Because Commercial Tenant Real Estate Representation Ltd. had negotiated the workletter, as well as the lease, shopped the marketplace, attended construction meetings, and walked the site, we knew what was going on. Although some "extras" were in order because of tenant requests, the landlord was trying to charge premium, not market-rate, prices for items like doors, electric outlets and lighting fixtures. Moreover, he was trying to bill our client for items that he was obligated to provide under the workletter we negotiated. We reviewed the bill item by item, eliminated improper charges and cut the tab more than 80% to $30,000.

     One landlord wanted to bill a tenant for "rough plumbing." The business executives we represented were stymied. But Commercial Tenant Real Estate Representation Ltd. is familiar with construction practices. We knew the landlord was trying to bill our client for removing the previous tenant's plumbing fixtures. We had specifically excluded this kind of cost during our lease negotiations and were not going to let the landlord relabel the charge and bill it now.

     Lawyers offer limited help with many workletter issues since they have no reason to know current market prices. In the vast majority of cases, they know little about actual construction practices. Nor is it likely they know the building your company is moving into. They know the legal documents they have been taught are "standard." And, of course, many lawyers are fundamentally hampered by seeing things from a landlord's perspective.

     Inspecting your space as it's being built out is another way we help your company save money. An engineer will tell you whether ducts are sized correctly and whether the right kind of conduit is being used, but they rarely have the detailed familiarity with lease negotiations to know whether what's being built is really what your company ordered. Drawings sometimes don't tell the whole story or aren't interpreted properly.

     For instance, one business we represented wanted office partitions capped off just under the ceiling tiles, so that if they wanted to reconfigure their space later on, the job could be done with a minimum reworking of ductwork and ceiling grid systems. This isn't always a good idea, but it's what the business wanted, so it's what we negotiated in their workletter. On one of our site inspections, we noticed the landlord was building office partitions slab-to-slab. This would mean additional cost if the tenant made layout changes. Rather than lose time by having the work demolished and redone, we got the landlord to agree he would absorb any additional cost our client might incur later on.

     Controlling the construction process -- the communications -- among landlord, contractors, architects and your staff -- records of what happened when and schedules to move forward -- is critical to controlling costs. Our systematic approach and continued involvement here helps you save money too. We monitor sign-offs, suggest when a tough response is required to get a landlord to perform and when a little finesse will be more effective. At construction meetings, we use our knowledge of lease dynamics and economic issues to resolve conflicts on the spot. We can help get projects back on track when landlord delay threatens your operations.

How we audit landlord invoices and
negotiate to recover overcharges

     Because of their relatively long terms and the complexity of facilities and services involved, most commercial leases require the tenant to pay increases in lease-related costs such as operating expenses and taxes. These "escalation charges," as they are commonly called, can exceed a million dollars a year on a good-sized lease. They are a significant, yet little scrutinized corporate expense. Real estate taxes, costs of landlord's administrative staff, electricity, HVAC engineers, insurance, supplies, repairs and maintenance, CPI increases, cleaning, extra air conditioning, security guards, life safety systems, among dozens of other charges, can al become sources of excessive billing.

     Typical landlord statements seek to recover millions of dollars in claimed expenses with little explanation. Commonly, landlords summarize their expenses in 10 or 12 very general categories.

     Even with an in-house real estate staff, few tenants have enough expertise and hands-on market data to determine whether these landlord chargesd are proper. A weak lease compounds the problem by imposing unrealistically short review periods, inadequate rights to review landlord's substantiating back-up materials, an onerous, ineffective or absent procedures for challenging these landlord charges.

     Result: building owners collect millions of dollars each year for expenses unrelated to legitimate lease costs and not permitted by the leases they agreed to.

     Commercial Tenant Real Estate Representation Ltd. helps you avoid landlord overcharges three ways:

• We analyze landlord charges to make sure they are properly limited to what was agreed to in a lease. Often this requires months of work piecing together landlord worksheets, tax data, vendor contracts, vendor invoices, our own building inspections and other information, to discover how your money was actually spent.

     Even with an in-house real estate staff, few tenants have enough expertise and hands-on market data to determine whether these landlord chargesd are proper. A weak lease compounds the problem by imposing unrealistically short review periods, inadequate rights to review landlord's substantiating back-up materials, an onerous, ineffective or absent procedures for challenging these landlord charges.

     Result: building owners collect millions of dollars each year for expenses unrelated to legitimate lease costs and not permitted by the leases they agreed to.

     Commercial Tenant Real Estate Representation Ltd. helps you avoid landlord overcharges three ways:

• We analyze landlord charges to make sure they are properly limited to what was agreed to in a lease. Often this requires months of work piecing together landlord worksheets, tax data, vendor contracts, vendor invoices, our own building inspections and other information, to discover how your money was actually spent.

• We analyze landlord charges to make sure they are properly limited to what was agreed to in a lease. Often this requires months of work piecing together landlord worksheets, tax data, vendor contracts, vendor invoices, our own building inspections and other information, to discover how your money was actually spent.

     One multi-national media company, occupying 150,000 square feet, asked us to review the operating expenses in their landlord bills. The landlord refused to provide back-up documentation. The accounting staff did everything they could to stall. After several letters, we got an appointment to review critical financial records. The landlord's staff kept us waiting more than six hours. Nonetheless, we went back several more time.

     By continually pressing for more detail, we finally got an accurate picture of the landlord's real expenses. We discovered the landlord had billed the tenant for all kinds of things utterly unrelated to the building: bachelor's parties, ski trips to Aspen, teddy bears, college contributions, charitable contributions, dinners at many of New York's most expensive restaurants. In addition, the landlord had billed the tenant for costly capital improvements which weren't operating expenses. Total overcharges exceeded $1 million for just two years. Our client received a satisfactory settlement.

     Altogether we've helped recover millions for the businesses we represent. We show landlords that even though a tenant might have violated some technical terms of a lease, they retain the right to collect. We convince landlords it's in their business interests to treat you fairly.

     Every landlord budgets a portion of your total base rent for brokerage commissions -- often 3.5% to 5%. This is why no landlord writes a commission check until you make it possible for him to do so. Although the landlord writes the check, you're still paying the commission. Since you're paying this fee, it ought to work for you rather than going to a landlord broker whose interests conflict with yours. By representing tenants exclusively, we see that your money serves your interests.

     For escalation reviews, our compensation is usually charged on an hourly basis like an accounting firm or law firm. Sometimes the charges are based on performance which tends to be higher if there are overcharges to be recovered.

     Perhaps now you can see why more and more companies have concluded that it makes no sense to entrust costly real estate commitments to brokerage firms, lawyers or consultants which represent landlords.

     Whether your company contemplates remaining remaining at its current location, moving to a new location, consolidating operations or just verifying landlord charges -- it's prudent to work with a knowledgeable representative serving your interests as a commercial tenant exclusively.

     For a confidential consultation, simply contact Marisa Manley, President, Commercial Tenant Real Estate Representation Ltd. 

Home     Quick search

CTRR serves commercial tenants exclusively nation-wide,
providing real estate brokerage & consulting services 
to help cut occupancy costs

Commercial Tenant Real Estate Representation Ltd.
12 East 41st Street, New York, NY 10017
Phone (212) 684-4400     Fax (212) 684-4403    
email mmanley@ctrr.net

Copyright (C) 2005 by CTRR Ltd.
____________________________________________