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What Is Lease Management / Lease Administration?

by | Sep 28, 2020

Lease management, sometimes referred to as lease administration, is the day-to-day execution of tasks related to a company’s lease portfolio. There’s no single approach to lease management. It involves reporting, document management, coordinating between stakeholders, and a myriad of administrative tasks. Every contract has stipulations and obligations that must be met, and someone has to take on the responsibility of getting them done.

Lease management tasks

Typically, lease management consists of the activities that take place after a lease has been agreed upon. To understand day-to-day lease management duties, you need to know the journey a lease takes. First, the final agreed upon contract has to be routed through the procurement, legal, and finance departments for approvals and signatures. After being signed, the lease contract needs to be stored somewhere, typically on a server, intranet, or software.

Next is lease abstraction, which is the process of compiling the key details of a lease into an easily readable format, known as a lease abstract. A lease abstract contains assets details, such as serial number or address, information on points of contact, financial details, and other data that stakeholders may want to quickly retrieve. In addition to the abstract, lease information must be inventoried in a format for easy reporting, which is usually done in an Excel spreadsheet or automated with software.

After that comes the onboarding process. The leased asset must be acquired and activated for use. If renovations and customizations are required, they must be managed as well. Keys need to be exchanged. The employees who will be using the asset day-to-day need to be connected with their counterparts on the lessee’s side. All of these details need to be tracked, managed, and communicated.

Ongoing lease management

Once the lease commences and initial details are taken care of, there are ongoing tasks that need to be addressed. If any aspects of the lease change, such as the point of contact, that information needs to be updated. As lease renewals and terminations approach, someone needs to alert the proper departments so they can negotiate a new contract or prepare for the end of the lease.

In addition to those administrative tasks, each lease must be accounted for. Invoices must be processed and paid by their due dates. Real estate leases often include common area maintenance (CAM), which is charged on top of base rent for maintenance fees. CAM covers landscaping, lobby, entryway, and hallway maintenance, elevators, and any other space shared by multiple tenants on the property. Charges for rent, CAM, and taxes should be verified against the terms of the lease agreement.

Audits and reporting

Making overpayments on rent and CAM charges is surprisingly common. Regular review of all lease documents, invoices, and other relevant data to verify that all assessed charges are appropriate helps prevent this risk. These lease audits typically focus on CAM charges but can be applied to any potential overpayments on lease contracts.

Because they have centralized access to key lease data, lease managers also support other departments by reporting on leases. Finance, procurement, IT, real estate, and any other department involved in leasing need reports to help make business-critical decisions:

On top of reporting, the lease manager is on point to respond when internal stakeholders need access to contract documents.

Who’s responsible for lease management

So who is responsible for lease management? Well, it depends. Lease management duties can be aggregated across multiple departments, handled by administrative staff, or placed under the responsibility of a single person.

Businesses with a high volume of real estate leases, like retailers, typically have a real estate manager who oversees all of their leases. Companies with a large number of equipment leases – think healthcare and manufacturing – may have a dedicated equipment manager. And finally, some companies have a general lease manager to maintain all leases, regardless of type. The person charged with lease management responsibilities can sit under the accounting, operations, or legal departments.

Managing leases is highly collaborative work, especially in large organizations. Lease managers route information amongst teams who may never work closely together. Because they play a central role in executing and managing information on leases, they need to be detail-oriented and strong communicators who can understand the nuances of each lease and communicate it to stakeholders in the back office and in the field.

Lease management tools

With the “what” and the “who” addressed, let’s look at the “how.” Just as ownership of lease management responsibilities varies, so do the tools used to complete the work. That being said, lease management tools can be viewed in two buckets: Excel and lease management software.

Excel

It’s not uncommon for Excel to be the go-to tool for lease management. It doesn’t come at any additional cost, most professionals know how to use it, and you can configure an Excel spreadsheet however you like. However, Excel has shortcomings that make lease management more time-consuming and error-prone. We’ve covered some of the pitfalls of Excel in relation to lease accounting before. Many of those same issues apply to lease management. Without automated alerts, rent abatements and concessions are missed, resulting in thousands of dollars in unnecessary costs. Plus, the time and effort it takes to build and maintain a spreadsheet takes away from other important tasks. Companies with more than 20 leases need a more sophisticated solution.

Lease management software

Software makes up for Excel’s shortcomings in a number of ways. Not only can it act as a database in the same way that Excel does, but it can also be a repository for all lease documents. The process of lease abstraction and preparation for reporting alone can be simply automated with software. Lease managers need to only enter the lease once, and the software populates the abstract and database needed for reporting.

Software also makes collaboration more effective. Multiple people can be given access to provide and view documents when they need to, saving valuable time for lease managers. Because of new rules for lease accounting, companies are scrutinizing their leases more closely. Having a central source of truth for all leases makes it easier for leaders and stakeholders across the organization to put their lease portfolio in perspective. While Excel can be a powerful reporting tool, it simply doesn’t compare to the capabilities that software provides. LeaseQuery manages leases in a central repository, simplifying day-to-day tasks like tracking dates, contacts, and payments. What can sometimes require multiple formulas across several spreadsheets can be done in one simple query with LeaseQuery. The larger or more complex a company’s lease obligations are, the more they need a sophisticated system for reporting.

What’s next for lease management?

As leases become more visible and companies look for more ways to control costs, lease managers will play a critical role in maintaining the data that informs future financial decisions. Lease management processes and tools will continue to grow more sophisticated to support and execute lease obligations. With remote work growing more common, having lease management tools that offer centralized access to important information ensures operational effectiveness and accuracy. LeaseQuery makes managing leases easier today and sets companies up for easier, more accurate lease accounting as well.

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