Many value-added services, for example, a coffee shop or sandwich shop in the lobby of a building, are treated as tenants or subleases. These arrangements typically call for conditional expenses to be added to the lease cost.
Expenses may include:
Percentage rent arrangements where the tenant pays a base rent, plus a percentage of sales over a predetermined ceiling.
Allocation of common area maintenance (CAM) costs to the tenant.
Payment of utility costs.
For non-profit organizations, unrelated business income (UBI) blockers may require payments made as a contribution to a foundation or other entity. In these cases, the payments may not be accurately tracked back to the original lease obligations.
For many organizations, these arrangements represent an unclaimed income or cost offset opportunity. A sublease or tenant audit can verify that all applicable revenue streams and cost offsets are recovered by the organization.
We frequently perform tenant audits to verify compliance with lease terms, in both commercial and not for profit organizations. Our professional staff includes experienced internal auditors as well as seasoned real estate advisors. We understand the nuances of unrelated business income, as well as best practices to ensure the nonprofit remains in compliance with the treatment of UBI. CCA’s professionals bring an average of 20 years’ experience to matters including compliance audits, workouts, debt restructurings and related income tax implications to litigation support including expert testimony and analysis for disputes involving real estate operations and complex real estate holdings.