Audit Case Study Synopsis™ (457)
New York, NY
Savings (square foot)
Exclusive Service Provider
North American Portfolio
Our team determined through the course of the audit that the landlord was charging through all costs associated with Americans with Disabilities Act (“ADA”) compliance even though the lease directly excluded costs of alterations and improvements made to cure violations of laws and requirements of public authorities where violations existed prior to the commencement date. It was also noted that the management fee calculation structure being implemented was flawed.
The annual increase in the management fee was supposed to be determined by applying the percentage increase in the Consumer Price Index for All Urban Consumers (“CPI-U”) from the same period the previous year. However, the landlord was calculating the annual index difference and using that static number as the percentage rather than calculating the percentage increase accurately. This error was artificially accelerating the increase rate for the management fee expense category. The audit also revealed that the landlord was including in building expenses all costs associated with corporate overhead including, but not limited to promotional fees, charitable contributions, meals and entertainment. Furthermore, the landlord was involved with the redevelopment of a public park project (not related to building) and was categorizing all design, architectural and planning fees as operating costs of the subject building.
Management fee increase calculation
Non-building related expenses