Regardless of how advanced the technology gets or how complex the issues can become in lease administration the number one driver of new prospect interest seems to be to capture key dates or critical dates. Aside from just capturing them, the wording and treatment of these dates are even more critical, because if confused or mis-managed, even capturing the date itself won’t prevent huge financial mishaps or misstated portfolio obligations.
Define the Terms & Workflows
Simply put, a key or critical date is any drop-dead-date associated with action or inaction. The first thing to do is to capture these drop-dead dates correctly and then consider how you want to manage them and how your software reports and treats these dates for daily workflow support. All of the other dates should flow from that drop-dead-date (ie Notice Start, Notice End, Option Term Start and End, etc). Next, consider the workflow and how much time may be needed by the various departments effected by the impending event. Most systems have “email reminders” or other triggering features to warn you that a date is approaching, upon you or past due. These can be great but if set too far in advance they are typically forgotten. We strongly recommend documenting your Key Date Management Practices and having a monthly review of ALL key dates. By looking ahead 12 or even 18 months, proactive business evaluation or planning can be performed, market conditions can be assessed and fair warning given to anyone impacted by a potential change.
Often, critical dates only get a lot of focus as they relate to transaction events such as expirations and/or options. However, there are a lot of other lease events and clauses that could warrant a critical date setup. Examples include:
Pre-move in construction dates
Tenant improvement spend expiration dates
Mid-term refurbishment allowance dates
Security deposit return or mid-term reduction dates
Automatic renewal dates
Base rent increase dates
Operating Expense reconciliation due dates
Notice of CPI Increase
Option to purchase dates
Option to terminate dates
Manage Through The Date
If you are a lease administration department or an outsourced group like PSG, your only role may be to abstract the lease and report the dates as requested. However, we always recommend being a part fo the discussion process to collaborate about the activity through the key date from the point of first notice/alert. This way we know that the business stakeholders are taking action and we can help with other lease administration activity, depending on what action is being taken. We can work with other outside people, like the tenant’s broker, to establish a plan well in advance. For instance, if we know 6-months ahead of time that a tenant is moving out, we can be prepared to finalize the operating expense calculation, make sure we’re on top of the security deposit return request and ready to deal with any final Landlord close-out issues. By connecting the team generating these dates and reports with the people in the field, there is an important level of risk reduction since most often these are the people that negotiated the lease in the first place. If there were any date adjustments or other terms that could affect this activity, it’s crucial to understand them and make adjustments to the system BEFORE its the last minute and the key date is eminent.
Like most things in lease administration, it isn’t terribly difficult but it’s really important and it needs to be done right. Everyone has a version of what “right” looks like and it should certainly reflect your business needs, but one thing we can all agree on is that missing the date is both wrong AND avoidable.