Understanding Tenant Operating Expense Reconciliation

Operating expense reconciliation is a common practice between tenants and landlords. Performing this type of reconciliation can help property owners better understand their tenant income and expenses so they can create more accurate annual budgets and better anticipate future costs.

Here’s a look at how Clarity Commercial helps our property owners with operating expense reconciliation.

Explaining Operating Expense Reconciliation

The first step in helping property owners with operating expense reconciliation is to explain just what it is and how it helps them. Operating expenses include utilities, property insurance, real estate taxes, maintenance, repairs, cleaning services, and other expenses. These expenses are passed on to tenants every year. The amount tenants pay is based on an estimate of what the property owner anticipates these expenses will be, based on past data.

Sometimes, the property owner’s estimate is spot-on. Other times expenses exceed the estimate. And happily, there are times when expenses come in lower than anticipated. Once the final numbers are in, property owners have the responsibility to share the results with tenants. Generally, if tenants underpaid, the property owner bills tenants for their share of the overage. If tenants overpaid, the landlord cuts them a check for the difference or issues a rent credit. How reconciliation is performed should be stipulated in the tenants’ lease agreements.

Why Reconciling Operating Expenses Is Important

Without going through the process of reconciliation, property owners would not have an accurate picture of their expenses or whether their current rent rates or lease agreements adequately cover expenses. Over time, the reconciliation process should provide an increasingly accurate picture of expenses (other than large, unforeseen costs). This can help a property owner better manage income and cash flow. If property owners habitually undercharge tenants for expenses, they may not have enough cash to cover expenses throughout the year. If they overcharge tenants, they may face cash flow issues in the next year after rent credits or checks have gone out.

Operating expense reconciliation is an important step in the property management process. The Clarity Commercial team performs reconciliations for our clients. For help with your own operating expenses or other tenant management challenges, get in touch with our team today

How Regular Site Inspections Can Help You Manage Expenses

We’ve all heard the saying “an ounce of prevention is worth a pound of cure.” This is especially true for commercial property management. Not only do regular site inspections help property owners avoid expensive emergency repairs, they can help property owners plan for capital improvements and other big-ticket investments. At Clarity Commercial, we perform regular site inspections of all of our clients’ properties to help them plan expenses and save money.

Regular Exterior Site Inspections

Exterior site inspections help property owners quickly address any emergent issues with the exteriors of their buildings, their parking lots, and their grounds. Clarity Commercial performs regular exterior site inspections. We understand that drive-by inspections are rarely effective, so our managers always get out of the car and walk around the building and parking lots to look for potential repairs or maintenance issues.
An exterior site inspection should include a close look at the building’s windows and siding to look for damaged or weathered trim, missing bricks, clogged gutters, and other issues. Managers should check the building’s doors and locks to ensure they are working properly. They should also pay attention to the condition of the walkways and driveway to make sure there are no trip and fall hazards. Lighting should be on and in good working order, too.

A quick look at the landscaping will identify whether the grass and flower beds are being maintained on an appropriate schedule. Long grass, weeds, or dead plants may prompt a call to the landscape company.

Regular Interior Site Inspections

Regular and frequent interior site inspections can keep surprises at bay. On our regular interior site inspections, the Clarity Commercial team will check the interior lighting to ensure hallways and tenant spaces are adequately lit. We will check doors to make sure they are working properly and inspect walls for dents, scrapes, and other damage.

An interior site inspection should also check the building’s heating, cooling, and air ventilation systems to ensure they are working properly. In many cases, we ask our HVAC partners to perform this specialized inspection. During our interior site inspection, we may also meet with tenants to ensure any maintenance and repair requests get handled promptly.

Regular site inspections are an integral part of the commercial property management process. The Clarity Commercial team learns a lot from the site inspections we perform. Sometimes, there are maintenance and repairs we can perform immediately, while other inspections uncover future maintenance and upgrade costs. Anticipating these costs help property owners plan for future investments and avoid paying for emergency repairs.

If you haven’t had your commercial property inspected in a while, get in touch with the Clarity Commercial team. We can work with you to ensure your buildings are in good working order and help you manage your maintenance and repair expenses.

 

All About Cloud-Based Access Control

Commercial properties have experienced a lot of change these last few years. Tenants have moved out and new ones have moved in. Other tenants have dramatically changed how, when, and where their employees work. Visitors to retail shops, medical clinics, and other businesses have ebbed and flowed.

All of these changes have challenged landlords and tenants alike to find new access control solutions. It may seem like a minor concern, but having the right access control system can make your life as a landlord or tenant much easier. Conversely, using a system that no longer serves you and how you work can interrupt productivity and create frustration. Clarity Commercial is here to help you find the cloud-based access control system that fits your current needs.

What is access control?

Access control is the term for the systems, processes, and policies that physically secure your commercial space. Access control systems can be as simple as a lock and key. But increasingly, access control systems include much, much more.

In the wake of remote work and high tenant turnover, many companies are choosing to upgrade their access control from master key systems or electronic fobs to systems that can be monitored and managed remotely. These systems offer landlords flexibility in authorizing and revoking access as tenants come and go, and offer tenants the same flexibility when deciding whom to allow to access their space.

What is cloud-based access control?

Cloud-based access control systems allow landlords and tenants to monitor and manage access to their spaces remotely from an online dashboard. Many cloud-based systems have swapped physical keycards for Bluetooth-powered access provided by a cellphone app. For landlords, this a huge timesaver, as they no longer have to spend hours coordinating keycards with tenants or tracking down lost or stolen fobs. For tenants, these systems make access to their spaces a breeze.

Cloud-based access control systems also make it easy to manage authorized visitors. Access can be given or revoked instantly through the online dashboard. Many systems offer temporary passes for visitors, too, which makes it easy to grant access to maintenance and repair crews and other contractors.

How can Clarity Commercial help?

Clarity Commercial can help landlords and tenants choose the cloud-based access control system that fits their needs. Our expert property management team can even take access control management off your plate as needed.

For professional property management help from Minnesota’s best commercial property management team, get in touch with Clarity Commercial today.

Selecting a Minnesota Commercial Snow Removal Company

Winter weather has arrived in Minnesota, and with it the guarantee of snow and ice for the next few months. Commercial snow removal companies are ready to kick into gear. If you haven’t contracted with a snow removal company yet, Clarity Commercial has a few tips on how to choose the right contractor for you. These are the things we consider when we select a commercial snow removal company for our property management clients.

Understand the Services the Commercial Snow Removal Company Offers

The first thing you need to gain clarity on are the types of services a commercial snow removal company offers. Not all snow removal services are the same. Some are large operations with a fleet of trucks and dozens of employees. Others are owner-operator endeavors with a truck with a plow, a snowblower, and a shovel. Both are good options depending on your needs.

As you interview different snow removal professionals, ask if they are able to perform every service your property requires. Confirm that they are equipped to plow your parking lot, driveway, and sidewalks, as needed. Inquire about their deicing services for your surfaces, too. Double-check that the company will promptly and repeatedly come out to salt your sidewalks and walkways, as you could be held liable for a visitor or employee’s slip and fall accident if you leave these areas untreated.

Negotiate a Snow Removal Contract and Set Expectations

Once you’ve settled on a commercial snow removal company for your property, it is time to negotiate the contract and set your expectations. Your snow removal contract should stipulate required services as well as when you can expect the company to show up at your property. It should outline how soon after a storm snow removal will occur as well as any preventative measures the company will take to prevent icy surfaces before a storm hits. Your contract should also include what happens to the removed snow. Will the company push it to a certain area of your property or haul it away? Confirm how you will get in touch with the snow removal company if an issue arises or you have an acute need for snow and ice removal.

Confirm the Snow Removal Company Is Insured

This last point is often overlooked. Many property owners assume the contractors they work with are insured. Since failing to remove snow and ice can leave you open to risk, you need to confirm that the commercial snow removal company you are considered is properly insured for snow removal services. Any reputable company will be happy to share this information with you.

Old Man Winter is already knocking on Minnesota’s door. For help finding commercial snow removal services for your property, contact the professionals at Clarity Commercial today

5 Common Leasehold Improvements

Typically, the next step after signing a commercial lease is starting work on leasehold improvements, also known as tenant improvements or tenant buildouts. These changes help tenants customize their new space to their particular business needs.

Any structural or cosmetic changes to the interior of a space are considered leasehold improvements. Exterior changes, additions, or changes to a building’s HVAC, fire protection, or security systems are usually not considered leasehold improvements. Landlords or tenants can pay for leasehold improvements.

Here is a general overview of common leasehold improvements for commercial properties.

1. Interior Structural Changes

It is common for new tenants to make structural changes within the footprint of the space they lease. Call centers may require cubicles, a law office may need to create a lobby, and a veterinary clinic may need to create exam rooms and lab space.

2. Addition of IT, Electrical, or Lighting Systems

Adding phone lines, internet and ethernet ports, and new lighting are considered leasehold improvements, too. Transforming a retail space into an office space or a medical clinic into a retail store will require significant changes to how a space is powered and lit.

3. Updated Wall Surfaces and Flooring

Updates to wall surfaces and flooring are also considered leasehold improvements. Adding drywall, painting, wallpaper, and other wall treatments are often necessary in reinventing a leased space for new use. So are changes to flooring. Carpeting may not be the best choice for a spa, and tile may not be appropriate for an office.

4. New Shelving and Countertops

Along the same lines, tenants may require new countertops and shelving systems to update their space. Adding shelving for a retail store may be a major investment, while countertop updates can make a huge difference in the look of a store, clinic, or office.

5. Installed Equipment

Permanently installed equipment, such as shampoo chairs at a salon or wash tubs at a pet grooming shop, also count as leasehold improvements. These type of tenant improvements cannot be easily removed at the end of the lease but are essential to the operation of the tenant’s business.

Leasehold improvements are part of the commercial lease process. Clarity Commercial can help landlords negotiate tenant buildouts with prospective applicants, including how the improvements will be paid for and by whom.

For professional guidance through the tenant improvement process, get in touch with the Clarity Commercial team today.