How to recover landlord overcharges – despite obstacles in your lease

 Above, overcharges typically occur because of landlord accounting practices.  In this case, the practice of  including capital expenses (the $197,400 cost of removing asbestos) among operating expenses billable to the tenant. 

CTRR has analyzed thousands of landlord monthly billings, and about half contain significant overcharges. For many tenants, over a 10-year lease, overcharges can run into hundreds of thousands of dollars. Every once and a while, overcharges hit seven figures.

     These billing errors tend to be charges not permitted by a lease, rather than mathematical errors. For example, a well-negotiated lease will limit the kinds of charges a landlord may bill. The lease will exclude, for instance, capital improvements while passing on to the tenant proper operating expenses.

     You might assume that when improper charges are documented, a landlord would offer prompt payment or credit. Yet many landlords do everything they can to avoid making good on overcharges.

     First, landlord often limit access to their documents substantiating and explaining what they have billed. They might provide incomplete documentation. They might delay responding to requests for information or meetings. And when presented with claimed overcharges, they might flatly refuse to pay. Incredibly, lease technicalities -- approved by a tenant's attorneys -- often limit the ability to recover landlord overcharges.

     Fortunately, a skilled tenant consultant can help recover a substantial portion of overcharges. There are 6 essentials.

  •  Don't worry that challenging your landlord's bills might disrupt your landlord relationship and maybe make your company a target for retribution. On the contrary, a professionally-prepared challenge will earn you respect as a businessperson determined to get good service with proper accountability.

  •  Understand the fine points of your lease. Even if your lease prevents you from securing a refund for certain overcharges, don't assume all overcharges are off-limits. Proceed with those overcharges where you aren't limited by your lease. This can result in at least a partial refund. Moreover, you could gain access to additional information which improves prospects for refunds of other overcharges. For example, charges billed annually are most likely to be subject to deadlines on challenging. Charges you are billed monthly or periodically, may not. Monthly or periodic charges, while often overlooked, can be larger than the amounts billed annually.

  • Prepare a thoroughly-documented case. A landlord won't respond to empty claims and "fishing trips." While documentation about some costs specific to your building can be had only from your landlord, other documentation is available from third parties, such as a tax assessor, utility company and cleaning contractors. In addition, an experienced tenant consultant will be able to draw on relevant data from comparable buildings.
  • Be specific in identifying improper charges. Explain clearly why they are improper. Refer to specific terms of your lease and other relevant, objective standards.
  • Be assumptive. Proceed as if technical obstacles in your lease don't exist, and you're entitled to proper billings. Sometimes landlords' managing agents aren't aware of the technicalities. More often than you might expect, they just don't enforce all the technicalities. Our practice is always to approach these situations on a business-to-business basis, understanding what motivates a particular landlord and how this can be used to bring about a resolution beneficial for the tenant.
  • Be persistent. Landlords might stall and otherwise obstruct your recovery efforts for many months, because such tactics do drive away some challengers. Ultimately, however, landlords can almost always be persuaded that it is in their self-interest to cooperate when you persist with a thoroughly-documented case. You might have to go up through the hierarchy of a landlord's organization. You should recognize the possibility of litigation when large amounts of money are at stake. Patience and persistence are absolutely essential.
  • Be friendly. Many overcharges reflect honest errors. In any event, productive negotiations are possible only if seeming overcharges are approached as honest errors. Always approach a landlord as a business partner whom you respect and whom you believe wants to do the right thing. This policy has enabled us to maintain good working relationships with powerful landlords, even though we have challenged landlord billings throughout Manhattan and across the country.

     Besides helping to recover landlord overcharges, an audit of landlord billings can put you in a better position to handle other lease-related matters. We’ve seen this many times. For instance, even if there are no overcharges, the knowledge you gain about building management and staffing practices can help you negotiate a better renewal, more space, less space or other changes in your current lease.