Why is lease abstraction – pinning fundamentals from commercial leases important?
Leases are considered to be the foundation of the assets purchased. Whether it is a retail lease, an office or industrial lease or a lease related to commercial space in a mall or a shopping center, leases are at the center of the income stream that feeds the property, thus making it vital for lease abstraction to pin down the fundamentals from commercial leases. Lease Abstraction – Pinning Fundamentals from Commercial Leases is a tool that can be successfully implemented for an accurate record of the income generated from the property leased. An analysis of the comprehensive lease file therefore is not only necessary but also an indispensable element of the due-diligence process. It is vital that each lease is studied thoroughly and then abstracted.
What is a lease abstract?
A lease abstract is a summary of key financial, business and legal information of a commercial lease. In addition to summarizing the standard lease provisions, it brings to the reviewer’s attention any unusual lease provisions, financial obligations and other important issues. The details of the information that needs to be abstracted depends on the purpose like, whether it will be reviewed for acquisition, management or a merger, or for underwriting and lending purposes. A basic lease abstract usually contain lease information; landlord and tenant’s contact details; description of the premises and square footage; the commencement and the expiration date; repair obligations and other useful information that is needed from a full lease document.
What information does a lease abstract usually contain?
The details of an abstract vary depending on the type of lease, but all commercial lease abstracts contain the following terms: the name of the tenant; the name of the landlord; the term of the lease; the amount of square footage leased; the space number; the base rent; the percentage rent and/or sales reporting; and a list of documents modifying the terms of the lease. If the lease is for retail space, the abstract might also contain the terms pertaining to hours of operation and merchants’ associations. If the lease is for office space, the abstract might contain the terms pertaining to lessee improvements. a person needs a lease abstract not for his or her own understanding of the terms of the lease, but for financing purposes. When a person seeks to purchase a commercial property with tenants, that person must perform what is called due diligence. Due diligence requires the potential buyer to inspect all aspects of the property including the status of the leases associated with the property. Sometimes, as in the case of the purchase of a shopping mall or a large office complex, there can be over 100 leases. If the lender, to whom the task of due diligence usually falls, is able to review abstracts of the leases rather than the leases themselves, the task is made that much more cost and time efficient.
What resources are needed to perform lease abstraction?
Lease abstractions work is usually done by outsourcing firms that are based in countries where labor is cheap. A good lease abstracting agency uses the services of attorneys, accountants and real estate professionals to ensure that the abstract accurately summarizes the essential information that is a vital part of the abstract along with additional information such as insurance responsibilities, and maintenance responsibilities for both the landlord and the lessee. These days, a number of lease management software packages are available that include a lease abstracting feature. The feature uses reporting software to take a lease that has been created with the software and abstract it. Usually, the abstracting feature allows the user to pull out the exact information needed, allowing a customized lease abstraction to be created each time. An abstract has uses outside the context of due diligence, too. It’s a good idea to have a lease abstracted each time there is a change in the terms of the lease, even for common changes such as a rent increase. Having it abstracted every time there is a change in terms will make sure that there are no surprises for either the landlord or the lessee.Thus, Lease Abstraction – Pinning Fundamentals from Commercial Leases is the most accurate definition for commercial lease abstraction.
Why choose Complete Legal Outsourcing to outsource your lease abstraction related projects?
Complete Legal Outsourcing has earned a name for itself in lease abstraction. Equipped with a team of law graduates, having relevant experience in commercial lease abstraction thoroughly review the leases and extract the dat that is hundred percent accurate. There twenty four by seven work environment is an added advantage that ensures that all projects are delivered within a stipulated time frame.