Commercial property transactions have grown to be very complex, requiring detailed commercial leases with clauses to cover many different issues and details. Lease abstracting is a process usually performed upon receiving a new lease document, and persons focused on the most important, as well as most frequently used, information in a lease will be able to compile the most effective and useful lease abstract.
Read More: What Does Key Money Mean in a Commercial Lease?
Definition
A lease abstract summarizes specific, key information from a lengthy lease document and makes it available for users to monitor, review and update easily. The abstract acts as a condensation of the original lease document. The abstract should summarize selected information from the lease, and show the reader where to look for further information.
Benefits
Commercial leases are usually abstracted to assist a leasing agent, lease administrator, and maintenance or property manager locate frequently referenced items in the lease without needing to continually go through the entire document. Commercial leases usually include a large degree of legal language that can make it difficult to quickly find critical lease data.
Additionally, all of the financial terms of the lease deal are documented in the abstract, which makes it useful for property investors or lenders. Providing a lease abstract rather than a full lease text also saves time and money for those who are performing due diligence on the property for a potential sale or acquisition.
Process
A useful lease abstract is one that is short and presents information simply. The abstract should serve as a road map to help navigate the lease document. The contents of any given lease abstract vary based on the contract's specific details. Some important items that appear in most abstracts are the tenants' and landlord's names, lease term, square footage, address, base rent, rent escalations and percentage rent.
Abstracting a lease is a skill and an art. Commercial leases contain standard clauses, such as alterations, default, damage and destruction, and estoppel. Each clause has specific details that are usually extracted from the contract language to form the brief contents of the abstract. Understanding commercial leases is an important key to understanding which information points are the most critical to extract.
Software
Software packages exist to enter and track lease data in an abstract format. For businesses working with a large volume of leases, a software database gives users the ability to search, retrieve and print leases, while also generating them. Another useful feature is the ability to track important events in leases with reminders for key option dates, deadlines, lease terminations and other events.
References
Writer Bio
Cynthia Gaffney started writing in 2007 and has penned tax and finance articles for several different websites. She brings more than 20 years of experience in corporate finance and business ownership. Gaffney holds a Bachelor of Science in finance and business economics from the University of Southern California.