FAQs regarding QLoop and lease auditing in general.
What does QLoop mean?
QLoop is short for “Qualified Loop” – a term coined by Andrew Chukwura, CPA. Through Andrew’s extensive experience directing, managing and performing thousands of commercial lease audits over 20+ years, he found that key factors (lease, property, premises and environment) critical to analyzing property operating costs for a leased space (premises) can be qualified in ways that aid predicting, identifying and resolving potential billing errors. “Loop” represents Andrew’s realization over the years that the determination of the attributes of the Qualified factors are connected via an infinite feedback loop, which also connects site research, premises selection, lease execution and administration, to site termination and the next site research and selection processes.
What services does QLoop provide?
QLoop, LLC was founded to provide online commercial real estate lease audit tools, lease audit resources and lease audit training services. QLoop does not perform lease audit services but may recommend, upon request only, lease audit firms that do to QLoop users and customers.
What is a lease audit?
A lease audit is the systematic and analytical process by which a lease auditor verifies that a landlord and a tenant are in compliance with their respective contractual rights and obligations pursuant to the terms of the contract (commercial lease agreement) for the premises (space) leased to the tenant. A good lease auditor should have a keen understanding of the fundamental elements which include the leases and contracts in general, and commercial property operations. A lease auditor must have strong accounting, auditing, analytical and communication skills.
There are two types of lease audits: (1) “desktop” lease audit and (2) full “onsite” audit. The “desktop” refers to audit performed by the auditor via correspondence and without visiting the property or the location, where the records are located. The “onsite” audit is of two forms. The first is the “onsite office” audit, which is merely due to the landlord’s request that the audit be performed in the landlord’s office. Often, this form bars the auditor from removing any documents from the onsite location. Other than the location of the onsite office audit and the auditor’s proximity to the landlord’s accountant and or property managers and building engineers (in the event the office is located at the property being audited), the onsite office audit is not materially different from the desktop audit. The second form of onsite audit is the “onsite fieldwork” audit, which entails an intentional inspection of the property, its facilities or its operation due to an identified concern of the auditor or the auditor’s need to better understand certain cost trends and values, which cannot be deciphered only from reviewing documents or interviewing the tenant and landlord personnel. The determination of which type, or form, of audit is to be performed could depend on the specifics of the lease or the desire of the primary parties (landlord and tenant) to the lease being audited.
While the results of a carefully planned desktop lease audit could achieve the desired objectives in much the same way as an onsite audit would, a landlord may be apprehensive of distributing contracts and proprietary materials outside its office thereby limiting the desktop auditor’s access to critical information.
Who are the typical lease audit participants?
The primary lease audit participants are the tenant and the landlord who are parties to the lease subject to audit. The secondary participants are the lease auditors, the landlord’s property manager, lease administrator or accountant and the tenant’s lease administrators. For an auditor, understanding this relationship could be key to a successful audit, which not only resolves the financial issues related to the lease, but also maintains or improves the landlord-tenant relationship upon conclusion of the audit.
Who would benefit from QLoop's lease audit tools, resources and training?
Lease auditors, lease administrators, tenants or any persons or entities interested in learning more about lease auditing and lease audit concepts. QLoop aims to provide insightful information beneficial to aspiring, novice or experienced lease auditors. Increasingly, lease administrators whose roles have traditionally been limited to the day-to-day administration of leases, are being charged with performing some lease audit functions. QLoop’s lease audit tools, resources and training are premises-centric and, as such, presents most concepts from the tenant’s perspective.
There is GAAS for financial statement audits, what are the standards for lease audits?
None. Unlike financial statement audits which are subject to generally accepted auditing standards (GAAS), there are no generally accepted lease auditing standards. While some commercial real estate bodies provide standard lease forms, most leases differ in structure and content because there are no standards by which all landlords and tenants must comply. As such, there are also no standards by which lease audits must be performed. In some cases, the landlord and the tenant may specify the parameters, requirements or procedures by which a lease audit may be performed.
Who should perform a lease audit?
Experience is a key factor in lease auditing. However, certified public accountants (CPA) and other accounting, property management or legal professionals, with the requisite mix of good accounting and auditing skills, a sound knowledge of leases, and contracts in general, and a strong understanding of property operations should be selected as a lease auditor. The use of an inexperienced lease auditor could negatively impact landlord-tenant relationship, and cost the parties more through opportunity costs and wasted resources.
Why is QLoop's focus on the premises (leased space) and not on the property owned by the landlord?
A lease agreement exists because of a tenant’s need for the leased space in a property. The terms of the lease agreement focus on how all costs which may be for the property are applicable to the specific tenant’s premises. Most commercial real estate bodies (including those which cater exclusively to tenants) are landlord-centric organizations in that they focus on providing the landlord’s standard property information and metrics for use by the tenant. Given that ten (10) tenants in one property could have 10 different lease terms and conditions, QLoop focuses on using the property information to provide premises information and premises metrics based on the specific tenant’s lease.