A commercial lease audit is a systematic review of every lease in the portfolio against the accounting records. The goal is to find errors before they become permanent losses.
Most owners audit leases once a year, or when a tenant disputes a charge, or when a new controller takes over. By then, the errors have compounded. A continuous audit catches them as they occur.
This checklist covers the 25 items that should be reviewed on every commercial lease, every month.
Rent and Base Terms
1. Base rent amount. Verify the rent roll matches the lease. Check for amendments that changed the rate.
2. Escalation schedule. Confirm the escalation type (fixed, CPI, step-up), rate, dates, and base. Verify the current billed rent matches the calculated rent.
3. Security deposit. Confirm the amount held matches the lease requirement. Verify any required interest or adjustments.
4. Lease term. Verify commencement and expiration dates. Check for early termination or extension options.
5. Square footage. Confirm the leased square footage matches the lease. Check for expansions, contractions, or remeasurements.
CAM and Expense Recovery
6. CAM inclusions. Verify which expenses are included in the CAM pool per the lease.
7. CAM exclusions. Verify which expenses are excluded. Check for capital improvements, depreciation, executive salaries, and other excluded items.
8. Pro-rata share. Confirm the tenant's percentage is correct. Verify the denominator (total leasable, occupied, or other).
9. Controllable expense cap. Check the cap rate, base year, and cumulative vs. non-cumulative structure. Verify the cap is being applied correctly.
10. Gross-up provision. If the lease requires a gross-up for vacancy, verify the calculation is being performed.
11. Estimated CAM billing. Verify monthly estimated CAM charges are being billed correctly.
12. Annual CAM reconciliation. Confirm the true-up is calculated, documented, and billed within the required timeframe.
Taxes and Insurance
13. Tax recovery method. Verify whether taxes are included in CAM, billed separately, or excluded. Check for tax escalation or base year provisions.
14. Insurance recovery method. Verify whether insurance is included in CAM, billed separately, or excluded. Check for insurance escalation provisions.
15. Tax increase pass-through. If the lease allows recovery of tax increases over a base year, verify the calculation.
16. Insurance increase pass-through. If the lease allows recovery of insurance increases, verify the calculation.
Tenant Obligations
17. Tenant insurance requirements. Verify the tenant's insurance certificates are current and meet lease requirements.
18. Maintenance obligations. Confirm which maintenance items are tenant responsibility vs. landlord responsibility.
19. Utility obligations. Verify which utilities are tenant-paid directly vs. landlord-paid and recoverable.
20. Repair and replacement obligations. Confirm responsibility for HVAC, plumbing, electrical, and structural items.
Rights and Options
21. Renewal options. Verify the option terms, notice deadlines, and rental rates. Confirm deadlines are being tracked.
22. Termination options. Check for early termination rights, notice periods, and penalty provisions.
23. Expansion options. Verify any rights of first refusal, expansion rights, or options on adjacent space.
24. Contraction options. Check for any rights to reduce space during the term.
25. Relocation rights. Verify whether the landlord can relocate the tenant and under what conditions.
The Alternative: Checks Built Into the Close
This checklist is designed for a periodic review — monthly, quarterly, or annually. The problem with periodic review is that errors compound between reviews.
- Rent and escalations are verified every month against the lease schedule
- CAM pools are validated against inclusions and exclusions as expenses are recorded
- Pro-rata shares are updated when the lease changes
- Caps are enforced as expenses are incurred
- Renewal deadlines are tracked against the calendar
The checklist defines what to check. The continuous audit defines when and how it is checked.
Conclusion
The 25-point lease audit is the minimum standard for commercial property owners. Each item represents a potential revenue loss or compliance risk. A periodic audit catches some errors. A continuous audit catches all of them.
Komod.ai is an AI-native operating layer for the commercial real estate back office. The platform reads leases, invoices, and bank activity; performs deterministic calculations; and stages completed work for human approval. Nothing posts without you.