Alpha Office Escalations: Eliminating the escalations headache

Escalations are an important part of commercial leases and are simple in theory, but in practice escalations have the potential to be wildly complicated based on the makeup and occupancy of a given property. “It’s very much of a niche specialty that requires a lot of experience to get it right,” says Bill Brownfield, Counselor of Real Estate (CRE), Certified Commercial Investment Member (CCIM) and author of The Escalation Handbook for Office Buildings. Escalations are the process by which operating expenses and taxes are allocated on a pro-rata basis to a property’s tenants (in addition to the base rent they pay). Because leases can—and often do—vary in definitions of who pays for what, it can be difficult to accurately calculate and invoice each tenant for its appropriate share. “Probably half of escalation invoices have errors in them. Those can be small errors or large errors,” Brownfield says. “Every individual lease is different, which means that there is the potential each tenant’s share of operating expenses to be calculated differently.” Click to read more at www.rednews.com.