Tag Archive for: Commercial property management

When should you hire a commercial property manager?

When Should You Hire a Commercial Property Manager?

Owning commercial properties is an excellent investment, but managing it can also be a lot of work. Some owners prefer to manage their properties themselves, but you may find it makes sense to hire a commercial property manager to help you out once you scale up. When does it make sense to take that next step? We’ll take a look at some of the factors you should consider before making your decision.

Factors to consider

Can you afford to hire a commercial property manager?

There is no set formula for commercial property management fees, but there are several ways that property management companies may charge for their services. For example, they may charge a percentage of the total collected rents. The percentage will depend on the company’s services—the more services, the higher the rate. Or, they may charge a flat monthly management fee for larger buildings and charge any on-site salaries and expenses back to the owner.

How property managers get paid - percentage of rent, flat fees plus expenses, contractor markups.

Fees may also be higher for properties that require more intense compliance and regulation, such as medical offices or food processing facilities. An older building with outdated equipment may also warrant higher fees as it is more likely to need more frequent repairs. Property managers may also mark up the cost of contractors’ prices by 5% to 15%. Be sure to get a breakdown of costs to get a clear picture of how much you will need to budget for property manager costs. You can find more details on commercial property manager fees here.

Do you have too many properties to manage on your own?

How many properties do you own? Are you able to give each one enough attention, or do you feel like you are always shortchanging at least one property? If you manage multiple properties at once, you could likely benefit from hiring a property manager. The more units you own, the more tenants you handle and the greater the responsibility. Each tenant may also have their own unique lease terms and agreements, making it critical to stay on top of various obligations.

Are you short on time?

Is your office staff working overtime to manage your properties? When was the last time you had a vacation? Hiring a property manager to take care of the day-to-day tasks can free up your time for other things. A property manager is dedicated to servicing properties as a full-time job and has much more flexibility to meet with tenants and perform repair work and other essential tasks.

Do you live near your buildings?

Tenants expect a quick response in the event of an emergency or issue. If you are not able to get on-site quickly, your tenants may become frustrated and angry. It’s one thing to make residential tenants wait for repairs or maintenance, but for commercial tenants, it’s their livelihood that’s at stake. Leaks, plumbing issues, HVAC failures can all lead to a loss of revenue or even a loss of inventory. A locally-based property manager can be dispatched swiftly to sort out any problems in an efficient manner.

Also, consider the amount of time you are spending commuting from home to your units regularly. Even living just 30 minutes away takes at least an hour out of your day, plus the time you spend on-site. Not only will you waste time driving back and forth, but you will also spend more money on gas and incur more wear and tear on your vehicle.

Do you want to hire and manage staff?

You can hire staff to manage your properties, but you may need several different positions to cover the same tasks a property management company can provide. You will also need to oversee those employees, and you’ll need to cover benefits and other expenses incurred by having staff on the payroll. Even if you hire contractors rather than employees, you will need to source out reputable tradespeople and supervise them yourself. Property managers typically have a pool of reliable, vetted contractors that they can call on to provide various services to their clients at any given time.

Do you want to be a landlord?

Does the thought of dealing with evictions, tenant complaints and maintenance issues leave you cold? That’s okay. Not everyone is passionate about dealing with commercial tenants and the responsibilities that come with being a landlord. An experienced property manager is skilled in handling landlord-tenant issues and can do so on your behalf. They are well-versed in enforcing lease terms and legal processes, so you don’t need to be.

So what can a commercial property manager do for me?

Commercial property managers can take care of a variety of services, depending on your needs. Most property owners know that property managers take care of facilities, landscaping, upkeep of parking lots and building repairs. But many of them can offer a lot more than just maintenance.

Here are some types of support a commercial property management company can provide:

What property managers handle, from lease admin to insurance to legal issues.

Tenant relations

A property management company can actively solicit and screen potential commercial tenants and show units to interested parties. That in itself can save quite a bit of time. In addition, they can field and resolve all inquiries and complaints from tenants, so you don’t have to do so yourself. They will be on the ground, building the day-to-day relationships with tenants, and they will be the first to know of any issues that may need to be addressed. Property managers can also coordinate move-ins and move-outs and handle the legal eviction processes. A good property manager will also provide a tenant retention plan to keep tenants happy and satisfied for the long term.

Lease administration

When it comes time to sign a lease, a commercial property manager can prepare documents and arrange the signing around the tenants’ schedule. They can also manage the different lease terms for each of your tenants. This in and of itself can be worth hiring a property manager, especially if your tenants all have different types of lease agreements and unique terms. They can also negotiate the lease terms to ensure that both parties receive a favourable opportunity.

Rent collection

Complex leases with different rates, due dates and terms, means rent collection becomes more complex, especially in commercial properties with multiple tenants. A professional property management company can set and collect rent on your behalf. They will also handle the associated financial record keeping.

Accounting and financial services

And speaking of record-keeping, another considerable benefit that some companies can offer is full accounting and financial services. Again, these services can be worth the money as commercial real estate finances and annual audits can be quite complicated. From keeping track of expenditures to identifying recoverable and non-recoverable expenses, defining capital costs and CAM charges, it can be challenging to stay on top of your accounting. And accurate financial reporting is essential to your business success. Hiring a company to take care of these responsibilities will help ease your burden.

Legal experience

Experienced property managers also understand landlord-tenant laws and can mitigate risk associated with legal processes around security deposits, terminating leases, safety compliance and more. They will also have knowledge of commercial building codes and construction standards.


This is an oft-overlooked area of responsibility because it only shows up when it is too late to correct. A certified commercial property manager will ask about the items a tenant is storing on the property that might not be part of the approved use of the premises. Often employees bring projects to the warehouse to work on weekends with company tools. A drum of used oil leaking into the ground can lead to a surprising amount of environmental liability long after the tenant is gone. Other concerns include overloading warehouse storage, which leads to fire suppression inadequacy, or failing to perform equipment maintenance and premises inspections as required to keep the building owner’s insurance policy in force.


A commercial property manager can also advertise and market your property to find the right tenants to fill any vacancies. They are experienced in writing compelling ads and know where to advertise to attract suitable candidates. They may already have a base of potential clients that could be interested in your properties if they are the right fit.

You may not require all of these services, but most commercial property management companies can provide assistance tailored to your specific requirements. The ideal property manager should have a good working relationship with both the tenants and you, the owner.

What are some disadvantages to hiring a commercial property manager?


Of course, the cost is an obvious disadvantage—if you do it yourself, you won’t have to pay other people. However, it makes sense to pay others who have a strong background and experience in the industry to take care of your investment. Remember—time is money! If you are spending way too much time managing your properties than you would like to, it is worth the expense. Calculate how much an hour of your time is worth, and then calculate how much the property management company is charging you. If the return on investment is high, then it is worth the money.

Value of your time versus property management company fees.

You may not be aware of day-to-day operations

Going from a hands-on manager to contracting out the services, you may feel disconnected from the daily operations. The idea of hiring a property management company is to relieve you of excess responsibility. However, it is natural to want to know what is going on in your own business. Ask the property management company to provide regular updates (weekly or monthly reports—you decide). Check in with your tenants as well to make sure they are happy with the contractor’s services.

No close relationship with tenants

When you take a hands-off approach to managing your properties, inevitably, you will lose connection with your tenants. The property manager will become their first point of contact, and they will regularly see the property manager depending on the services they are contracted to do. However, this may also be an advantage to anyone who prefers not to deal with tenants directly.

A property management company may handle things differently than you would

If you are very particular about how you want your properties managed, you may be hesitant to hand over the reins to a second party. However, you can interview various companies to find the right fit for your style. Prepare a list of questions to ask and understand what is reasonable within the industry.

You will have to manage the manager

To ensure that your business is running smoothly, you will need to be in constant contact with the property manager. Schedule regular check-ins and request monthly reports to stay well-informed. Ask for cash flow statements, balance sheets, profit and loss statements and any other information that can give you an overview of your financial performance. Read the reports and analyze them for any irregularities.

You may not be aware of critical data

When you step back from the operations, you may not be informed of significant payments or refinancing triggers. Again, make sure you set up a system with the company to contact you when critical financial decisions need to be made. Check to see if the company uses property management software like CRESSblue. If they do, they can easily set you up as a user on the system, so you can keep yourself up to date and informed at all times with automatic owner’s reports.

Bottom line: Hiring a commercial property manager is up to you

While deciding whether to hire a commercial property manager is a personal decision, there are many advantages of doing so. Finding the right company to manage your property can save you both time and money and reduce your stress level. Look for an established commercial property management company with the knowledge and experience to help you get the most out of your investment. To find the best fit for your business, take the time to do your research and thoroughly screen the commercial property management companies. Ask your colleagues for referrals, and look for a company that shares the same business philosophies as you.

The commercial property manager represents your company and should be considered a long-term partner in supporting your business vision. A successful partnership will result in a more substantial return on your investment.


This article is for informational purposes only and is not intended as professional advice; please consult a competent professional for advice specific to you. This blog is written to stimulate thinking on concepts related to commercial leasing. Please join the discussion with your experiences.

Martin Sommer, CEO, CRESS Inc.

Follow me on LinkedIn

Martin is a founder and the CEO of CRESS Inc., a Canadian SaaS company that automates lease administration and asset management. Martin also manages Karanda Properties Limited industrial portfolio as Director of Operations in all areas of commercial property management, including new development, asset management, capital expenditures, operations, leasing and lease administration of the industrial portfolio. Martin writes about property management workflow and issues. Book Martin to speak at your industry event.

Which property management software is right for you?

Choosing the Right Commercial Property Management Software

Migrating your business to commercial property management software can dramatically improve its efficiency, scalability and profitability. But with so many programs available these days, it can be challenging to know which will intuitively do what you need it to do. Take the time to do your research and carefully evaluate your options to find the best solution for your business and portfolio.

Here are a few things to consider before jumping ahead and selecting a software program.

Which features do you actually need?

It’s easy to get caught up in all the marketed features of software offerings, but it’s essential to determine your needs and then decide which plan provides the best and most robust solution.

Do you manage net leases on multi-tenant properties? Do you need the capability to budget for and calculate common area maintenance (CAM) instalments? These are integral to any commercial property management business. If you answered yes to any of these questions, you need software specifically designed for commercial (not residential, not generic) property management.

Map out your workflows

The goal here is to identify what you really need your systems to do. Think about and research effective workflows. How does information travel between people? Who knows the information the best? Who receives it first? And who needs that information to do their work?

Using a lease agreement as an example, we get the following answers:

  • The lease negotiator knows the lease agreement the best.
  • The leasing agent has the information first.
  • The property manager and accountants need that information to do their work.
    • The PM needs it to know what the landlord is responsible for maintaining and what the tenant must maintain.
    • The accountant needs to know the rental rates, what costs are recoverable from the tenant and what dates apply.

Map workflows to specific positions within your organization. Avoid directing workflows to specific individuals in your company. Doing that makes you susceptible to hostage-takers, i.e. people who threaten to derail your entire improvement process unless they get their way. These people are most easily spotted by their “black box” spreadsheets, the critical part of your current systems that only they understand.

Avoid mapping workflows to specific individuals in your company.
DILBERT © Scott Adams. Used By permission of ANDREWS MCMEEL SYNDICATION. All rights reserved.

Don’t be blindly pulled into features that already exist elsewhere

For example, it may sound helpful to have the ability to collect rent payments in a tenant portal. But really, no software can improve upon the security and functionality of existing payment services such as bank or credit card pre-authorized payments. Replicating this functionality into another workflow system is redundant and would significantly increase your licensing cost of such software. Similarly, realtors use MLS. Use the platforms where other realtors are looking, rather than using an in-house listing site with no traffic.

Payroll is already processed by external services and accounting software packages, so you don’t need it in your property management software. Instead, look for a solution that provides an interface to integrate the two applications smoothly. QuickBooks provides accounting capabilities and integrates nicely with leading commercial property management software. If one person manages parking lots and revenue, use a parking lot software system for that. Why require people to be trained and use non-standard software systems when there are already reasonable solutions available? As the saying goes, if it isn’t broke, don’t fix it.

Duplicating features already delivered with excellence by existing software is not helpful.

Ask for recommendations

Talk to colleagues and find out which systems they use. Ask them if they are happy with what they are using and, if not, why? Post questions in property management forums to get advice from your peers on the topic. Ask your employees to identify workflow bottlenecks or any areas that could improve. They may be able to offer suggestions to improve efficiencies.

Be clear in what you expect your staff to do and be reasonable in what you want them to use. Don’t look for an elusive silver bullet software package that “does everything.” Your property management software should specifically address lease administration and asset management for a commercial property portfolio. Moreover, it should be the best system for handling and automating these functions.

Systems integration versus silver bullets

Once you map out your workflows, start your search for the best solution to each phase of the workflow. All your lease administration should stem from a core solution. There shouldn’t be triple entries in lease administration software, accounting calculation spreadsheets and an accounting app.

Your expectations should also not be to find a magical silver bullet that can do everything internally. That isn’t how the rest of the world works. No one wants to learn your specific payment system in your portal because people already pay bills with their bank or their credit card or existing major payment processor like Paypal. No one wants to see your listing website with only your handful of property listings. They want to see and compare all the listings available to them in that area.

Pay attention to which workflows are dictated by natural processes in the industry (such as lease negotiation, document signing, leasehold improvements, lease administration and accounting) and which are being driven by system deficiencies (such as passing paper invoices around for review and approval signatures). Natural processes are good, so keep those. You will want to research better solutions to address the system deficiencies.

Watch for discontinuities between workflows. For example, land development is its own process and has a distinct separation from ongoing leasing and property management activities. A single solution will not work for those two workflows.

Transactional versus relational processes

Consider the differences between transactional and relational processes. Lease negotiation is transactional. You will no longer require the leasing agent, lawyer or realty listing once the lease is executed. Property management and lease accounting are relational. There is an ongoing relationship between the landlord and the tenant that will exist for many years. The requirements of those types of workflows are too different to be effectively addressed in a single solution.

Your goal is to identify which solutions are already effective with widespread acceptance and see how they integrate into the systems you think will work best for your workflows. Build your processes to meet the requirements of your workflows.

Organize your current business processes

So, you know you need to automate your processes. You know that informal accounting processes, such as relying on stand-alone spreadsheets or using accounting programs that are too generic for net lease administration, hold your business back. Review your current system to understand what you need to do to prepare for a software migration.

The amount of effort to transition to a new system depends mainly on the state of your documentation and business processes. It will take you much longer to prepare for the change if your records are disorganized, duplicated or incomplete. Are your records stored in multiple formats, including Excel spreadsheets, Word documents, off-the-shelf accounting software and paper files? Are your lease agreements contradictory (we see this often) or otherwise unclear? Collect all leases and invoices, find missing information and correct any data inconsistencies and errors. Update them with any addendums and changes that may be required. Cleaning up and streamlining your data is the key to a smooth transition. While you’re at it, update tenant contacts and addresses for notifications and move tenants to online payment systems.

Moving to new property management software can dramatically improve your business systems. But it doesn’t magically happen with the click of a purchase button. It takes a little thought and time to transfer complete data into a database. The result is that inefficient internal processes upgrade to a fully efficient, transparent and accurate workflow. Smart commercial property management software will actually establish or improve your strategic business behaviours and decisions.

Are your timelines realistic?

Now you know that migrating to a new system that improves your business workflow will not be instantaneous and thought-free. Sophisticated and automated processing systems require some data migration and account setup. Block time for data collection and entry. You will need to validate, gather and enter a variety of data. Besides entering the primary business data, your clients’ information also needs to be input into the system.

Schedule in time to set up user roles for staff, owners, tenants and others. Think about your current workflows to identify the staff members who will work on the new system. Review each employee’s position to understand the objective of their work. Is each function assigned to the right person, or does it make sense for other people to be responsible for specific tasks more relevant to their actual job? Plan to provide some instruction on how they can access, use and benefit from the new software. Consider allotting time for employees to receive training on the optimized workflow and software use.

Now you’re ready to consider new commercial property management software

You’ve gathered your files and read through your leases. Your business records are organized. You understand the need for a reasonable setup process and timeline. You are ready to take the leap!

There are three main areas to consider when selecting a new property management software package. Here are some recommendations that can help you decide which is best suited to your business needs.

1. What’s included?

You’ve defined your requirements, so now you can assess your options based on this list of must-haves. Commercial net leasing is relatively similar in scope, regardless of business size. Every commercial property landlord needs to track capital and operating expenses, contracting costs, budgets, reconciliations, cost recoveries and various lease terms. However, each software vendor offers a variety of features.

For example, some key elements of property management software include:

  • Lease management
  • Document management
  • Standardized administration and documentation
  • Automated workflows
  • CAM allocation and recovery processing
  • Expense management
  • Searchable records
  • Automated notifications
  • Budgeting
  • Reporting functions
  • Digital “sticky notes”
  • Customized roles and permissions
  • Online service requests

Not all software programs may include these features, so take the time to identify the functionality you need to ensure optimal efficiencies. Also, ask whether the pricing plan provides everything you need. You don’t want to find out that you’ve paid for a basic package, but the functions you need most are only available for an extra fee or in a premium package.


One ultimate goal of using a property management software program is to automate your commercial net leasing workflow processes. A program with generalized automation cannot process unique transactions, and it creates more work for your staff. You want to make sure that you leave the Excel spreadsheets and the calculators behind once you migrate to a new system. It should automate the most complex calculations for you in an instant.

Your software must have capabilities that meet your management and reporting requirements. Otherwise, it’s not worth the investment. The most efficient software will offer automation of property data, leasing, budgeting, rent, CAM fees, reconciliations, property management fees and reporting. It should also support every kind of property in your net lease portfolio, including office, retail, warehouse and industrial. Additionally, it needs to integrate with an existing accounting system to achieve maximum workflow automation.

Cloud-based or desktop installation?

Another decision you will need to make is whether you want to buy software out of a box or move up to a cloud-based system. Cloud-based technology is generally more affordable than desktop software. It also makes it easier for staff to work remotely and keep data centralized and updated with the latest information. But some companies are still reluctant to trust the cloud for security reasons. That said, cloud-based systems typically utilize enterprise-level hosting services such as Microsoft Azure, Amazon or IBM, which provide a much stronger protection level than can be implemented at the local level.

Software installed on a desktop computer does not require an Internet connection and therefore is not affected by connectivity issues. Still, local users are responsible for backing up the data, and not all information updates simultaneously. Furthermore, desktop software can only be used on the computer it’s installed on, whereas cloud-based systems can be accessed from any device, anywhere. While this may be a personal choice for smaller shops, cloud-based solutions are typically more cost-effective and offer essential teamwork flexibility required by growing firms. If you’re still not sold on the benefits of cloud-based computing, this article may help.

Go for a test drive before you decide

Many vendors offer free demos or trial periods to use their software. Take advantage of this opportunity and choose two or three to evaluate. Demos and trial periods will allow you to see exactly how the software works and give you a feel for the functionality. Note that software that robustly automates your workflow requires some setup. Therefore, sophisticated software companies will offer demos rather than less-helpful trial periods.

Book demos to be sure the software automation will improve your workflow efficiency.

During this time, look for clues as to how intuitive the system is. Does it reduce steps, or does it seem more complicated than your existing processes? You want to choose something that makes the workflow as efficient as possible. Make a list of pros and cons for each and compare how each one satisfies your requirements. Doing your research will help you make an educated decision and give you a better sense of which features are most important to your workflow.

2. What value does it offer you?

Property management software is an investment in your business and should be treated as such. Do some research into property management software’s average cost and develop a realistic budget for software setup and ongoing licensing. Investigate the different plans available and what you get for them. Is the fee a one-time payment, or do you make ongoing monthly or annual payments? Does additional functionality mean additional fees?

Ask whether new versions and upgrades are included or whether your purchased version will get left behind. Does the investment increase team efficiency and make them available to be more productive? Is the software’s cost overshadowed by the financial gains such as eliminated slippage, faster annual audits and increased revenues? Is lease compliance instant and easy to validate? Do the math to make sure you are getting the most for your money.

How many licences do you need?

Many programs are licence-based, so knowing exactly how many licences you require will save you money. Make sure you take inventory of how many users need to access the program. Don’t forget external users such as tenants, accountants, lawyers and property managers.

However, bear in mind that it is easy to overestimate how many users need licenced access. For example, let’s consider a property management company that relies on 15 people. Two are property owners who only need access to reporting, one is an external accountant and three are realtors who use MLS and Argus for their daily tasks. Four others are maintenance staff. The remaining team members include three property managers, a lease administrator, a bookkeeper and one receptionist. With CRESSblue, the company actually only needs one professional and four standard licences instead of the 15 they initially assumed. Ask the vendor to break down the level of access provided for each licence type to help you calculate what you need. Investigate how much additional licences will cost if you do take on new employees at a later date.

A 15-member team may actually only need 5 to 6 primary user licences.

3. Are training and support available?

No matter which software you choose, the company should stand behind their product and lead your team in the setup and implementation phase. If the company expects you to execute it yourself, be wary. A trustworthy software provider should provide a setup plan for the rollout, and their support staff should be well-versed in the industry. They should also provide documentation, support and training. Do they offer after-hours on-call support for any emergency issues? Find out whether support is included or available for an additional fee.

How is support delivered? Can you access help via options such as online meetings, phone, chat, e-mail, built-in help, videos or one-on-one support? Are in-house training sessions available? The best software companies will offer a wide array of options to support you and your team throughout the transition period and beyond.

Now it’s time to get to work

As you can see, choosing a property management software requires planning and research to ensure that you select the best-suited program for your needs. The right software is the one that does everything you need and does it intuitively, effectively and efficiently. We’ve created a checklist that can help make your decision easier. Download the “How Do I Decide?” worksheet to evaluate the six critical areas to consider when evaluating software for your commercial property management business.

Choosing the right property management software can propel your business to a new level of efficiency and scalability. The long-term benefits—saved time, increased income and enhanced professionalism—far outweigh the time investment to set it up and the annual licensing cost. With a bit of research and careful evaluation of your options, you can find the best solution for your business and portfolio.


This article is for informational purposes only and is not intended as professional advice; please consult a competent professional for advice specific to you. This blog is written to stimulate thinking on concepts related to commercial leasing. Please join the discussion with your experiences.

Martin Sommer, CEO, CRESS Inc.

Follow me on LinkedIn

Martin is a founder and the CEO of CRESS Inc., a Canadian SaaS company that automates lease administration and asset management. Martin also manages Karanda Properties Limited industrial portfolio as Director of Operations in all areas of commercial property management, including new development, asset management, capital expenditures, operations, leasing and lease administration of the industrial portfolio. Martin writes about property management workflow and issues. Book Martin to speak at your industry event.

Three things you'll wish you knew before becoming a property manager.

Every Successful Property Manager Knows These 3 Things

Do you think you know enough to be a master-level property manager? Here’s how to step up your game, reduce your risks and actually turn a profit. We have picked the top three areas where you need to have real skills in order to be successful.

Key areas of knowledge you need to have including business, lease clauses and percentage rents

1. It’s a business, and you’re in charge

So you bought an investment property. That means you’re an investor now, right? Possibly. Buying a commercial building can be an investment, but buying and leasing a building doesn’t make you a property manager; it just makes you a landlord. Unlike any other major investment vehicles, real estate isn’t a buy-it-and-forget-it venture. Without understanding and following some key business processes, your investment is likely to underperform and could actually lose you a lot of money. Manage your properties poorly and you could end up in court as well.

So what are the keys to being a successful property manager? Let’s dive in!

Understanding financial investments

Most people understand the simple initial financial analysis. Often, investment property shows cover the basics, which are easy to follow. Additionally, there are plenty of free software tools you can download. Typically, the education stops there.

Asset management

Whether you are a building owner or managing someone else’s property, you need to understand building maintenance, basic construction management and capital expenses. Most commercial leases indicate all major capital expenses are the landlord’s responsibility. An unplanned early capital replacement can make your investment returns drop considerably or even lead to losses. Not making timely building repairs can lead to lawsuits from tenants for negligence and preventable losses.

Business structure

Owning a commercial building is a business. Managing a commercial property is also a business. Even though the owner—or a group of owners—may be the same for both, they are often separate businesses, regardless of whether they are owned independently or deal with each other at arm’s length. There is a common misunderstanding among inexperienced owners and property managers that accounting for the property-holding company and the third-party property management company can be merged. It’s important to keep the two separate and maintain organized, traceable financial records.


Business success depends on keeping up to date with your accounting and doing it correctly. With commercial net leasing comes a host of accounting requirements specific to allocating costs to tenants according to the terms of the lease agreement. There’s an excellent overview article here and a more in-depth article here to help you better understand these concepts. Your skills and performance in this area determine most of your value as a property manager. Competence in these fields relies on your expertise in asset management, lease administration and well-structured business relationships.

Build your skilled team

Knowing your business is a considerable challenge! To successfully make money on your commercial property investment requires a wealth of industry knowledge. For example, there is building construction knowledge, legal and accounting expertise, real estate market information and connections to keep current. It’s impossible to gain all the required skills in a short period of time. If you want to build wealth and manage well, you need to build your personal network of trusted business connections so that you have reliable experts you can depend on. Just remember that while you can delegate tasks to your team, you are still ultimately responsible for the operation of the business.

2. Lease administration for property managers

Commercial leases are mostly standard boilerplate clauses that rarely affect anything, right? Wrong. They all mean something significant; that’s why they were developed over time and included on most leases. You need to have a grasp of why those clauses are there and what triggers them. The lease terms are there to provide boundaries to acceptable behaviour from the tenant and the landlord. A good lease works like a flow chart, catching various problem conditions and funnelling the outcomes to predictable results. We covered the key points in more detail here.

Understanding commercial leases allows you, the property manager, to be a better negotiator. Lease clauses were developed over the years in response to situations that appeared in disputes and court cases, and from those, a set of semi-standard lease terms were constructed. They use language tested in courts and guided by case law to interpret those specific phrases. Collectively, these are known as “standard boilerplate” clauses. Boilerplate clauses are terms and conditions included in all lease documents to avoid potential legal cases. They also provide a sense of security to the lease parties. They understand they will have reasonably known outcomes if those situations arise. The trouble with the boilerplate is that it was developed—and used—assuming the future will be reasonably similar to the past. That assumption blew up with the pandemic in 2020.

Some lease clauses with significant impact

Here are just a few examples of clauses that need serious rethinking:

Restrictive use clauses

These show up in retail leases all the time. Essentially, they prevent one or more parties from engaging in the sale of certain products or services. They are by definition anti-competitive as they restrict the premises from being used for various banned uses. These are often called “radius clauses” because they apply to a circle around the leased premises with a defined radius or even several radii. The closer the infraction, the greater the repercussions for breaking the restriction.

Restrictive use clauses have one of three principal drivers for their inclusion:

  1. If the tenant signing the lease requests them, they are trying to prevent the landlord from leasing space to one of their competitors. The reasoning behind this is explained by game theory and the Nash equilibrium.
  2. If the landlord requests it from the tenant, there are at least two reasons. One, they have given exclusive rights to another tenant and need to make all new tenants comply with those previously agreed-to conditions. Two, they could be trying to prevent the tenant from taking its business elsewhere within the same proximity. To make sense of this, you’ll need to understand retail rents (coming up in the next section).
  3. The last type of restrictive use is where the property manager deems the business use to be undesirable. This type is most evident in shopping malls, for businesses such as gyms and service providers. Once forbidden, they now seem to be the saviours of many commercial retail properties.

Restrictive use clauses can cause headaches for property managers

The problems with restrictive use clauses are many. First, unless the tenant is the first in a cluster of retail locations, other tenants may already have restrictive use clauses enacted or may have the freedom to sell the products the new tenant wants to restrict. Second, the way the lists of products are written is often the issue. What appeared to be clearly defined limits when the lease was written becomes muddied when cross-over products are developed. Are those restricted or not? Third, the remedies stipulated in the lease may be very difficult or expensive to collect. This is especially true when the actual damages cannot be quantified, and the lease provisions seem illegally punitive as a result.

If you want to get into this more, there’s an excellent blog here that digs into this much further. Lastly, restrictive uses embedded in many leases can be difficult to remove as perspectives change on what is considered undesirable.

Expansion clauses

These come in a variety of forms: a Right of First Opportunity (ROFO) or a Right of First Refusal (ROFR). These can be one-time, ongoing or time-limited. They can refer to a specific space or any adjacent or nearby space in the same complex. In all cases, they are for the benefit of a tenant and restrict the landlord’s ability to lease the property.


A Right of First Opportunity allows a particular tenant to have the first opportunity to expand into some space that becomes vacant. This is generally preferable to a landlord than the other option, a ROFR.


A Right of First Refusal allows a tenant to make a last-minute attempt to match a competing lease offer on available expansion space. The prospective new tenant may find that all its negotiation efforts and costs benefit an existing tenant when this right is exercised. Having a ROFR lowers the interest of new tenants in the landlord’s property.

Problems with expansion clauses

Not understanding the implications of expansion clauses can lead to some tough and very costly situations for a landlord and subsequently for the property manager.

First, make sure the lease uses the correct terms. A ROFR is a lot less desirable to a landlord than a ROFO.

Second, make sure the time limits are clearly defined, both for the right itself and the timeframe a tenant has to exercise it. Is it a one-time right? If the tenant uses it, is it gone or can it be exercised repeatedly any time during the course of the lease term when any new space becomes vacant? Can it still be used later for another opportunity if it is refused once?

Third, what happens when more than one tenant has an expansion right over the same space? With ongoing rights, previously spaced tenants may become adjacent to the same open premises.

Finally, what constitutes a matching offer? Tenants are not identical, and a landlord may prefer one type of business over another. Additionally, the property manager may project that a lease with one tenant will be more lucrative, which—all else being equal—makes that offer better than lease rates alone describe.

Operating expenses and caps

We’ve seen all kinds of additional rent capping clauses. Most of them aren’t written well enough to be worth the paper they were written on.

The lease sections on operating costs are often one of the longer ones, but they almost invariably rely on two definitions that aren’t really definitions at all. They split property expenses into “operating costs” and “capital expenses” as if these words have no gray area between them. To an accountant, once these amounts are recorded in the journal, they are either one or the other. But in practice, property managers often see operating and maintenance costs where tenants see capital repairs.

Using two accounting words doesn’t make the definition any clearer to anyone. The best clauses include:

  • A schedule that lists specific details about equipment and asset classes
  • The type of maintenance or replacement
  • Whether it is deemed an operating expense or a capital expense
  • Who is responsible for having the maintenance done
  • Who pays for it
  • How it is paid for
  • The amortization period

At least then you have a hope of both parties having the same understanding of cost allocations.

Cost control caps

Precisely because the additional rent is such a practical mess in most leases, lawyers and negotiation teams look to simply cap those operating costs by putting an artificial limit on what the landlord can recover from that tenant. Let’s take a look at the various solutions we have encountered and the problems with each.

The straight-line cap

This is the simplest cap. It can have a variety of forms, from fixed amount annual increases to incremental percentage increases. The laziest implementation is what is known as the “base year” for additional rent. In this case, the net lease specifies a monthly rent, which includes the first year of the additional rent. Base year leases rarely get a proper reconciliation. Likewise, the amount for the base year additional rent is seldom specified in the lease. Moreover, the straight-line method fails to account for times when there are significant maintenance upgrades to the property, such as repainting or regenerating the landscaping plan. It either leads to the property manager missing out on additional rent recoveries or the more likely scenario where the property never gets any significant updates.

Year-over-year versus initial rates

Some leases cap the increases based on the previous year and some base the cap on the initial year. The year-over-year method penalizes the landlord every time they successfully bring in a lower budget, as they are forced to reset the cap lower for the next year. The initial rate method constrains the increases below a line that cannot be exceeded. This results in a fairer cap towards the landlord. Most often, the problem encountered is that the initial rate is rarely included in the lease document, making this cap impossible to enforce.

Controllable expenses

In an effort to negotiate an impasse over the additional rent cap, a common compromise is to insert the words “controllable expenses” into the cap clause language. While this sounds like reasonable language, applying it in practice is anything but. We can likely agree that the property taxes are out of the scope of the landlord’s control. What about property insurance? Winter maintenance costs or liability insurance? In one exercise, about 3% of additional rent was actually discretionary to the landlord. The rest was out of their jurisdiction or controlled by market forces that the landlord couldn’t influence.

Using controllable expenses can lead to complicated accounting procedures. Each of the expenses will need to be classified, applicable caps set and, for each expense class, the initial rate or amount must be recorded. It’s seldom worth the effort. For example, it could cost $1,500 of billable time to calculate a $300 annual savings on the tenant’s additional rent.

3. Understand percentage rents

Every property manager should understand how percentage rents work. Percentage rents are a complex rent calculation method for determining the rent based on a fixed minimum rent and a variable portion based on the tenant’s monthly sales. A percentage rent is rent applied above a minimum base rent and is a percentage of the gross sales that the tenant makes from the premises. The percentage is often estimated and reconciled on a monthly or annual basis and may be averaged over a period of time.


The percentage rent applies once gross sales meet a certain threshold. The point at which percentage rent is paid is called a “breakpoint” and can either be a natural or artificial breakpoint. If the breakpoint is never met, the tenant is only obligated to pay the minimum rent.

An artificial breakpoint is simply a dollar amount of sales, where a specified percentage of gross sales above an agreed-upon dollar amount is to be paid in percentage rent. For example, if the percentage rent is 25% of gross sales above $25,000 a month, then the percentage rent on $30,000 gross sales is $1,250.

To calculate the natural breakpoint, simply divide the base rent by the established percentage. The logic behind the natural breakpoint is that a retailer should only pay the percentage rent on sales over and above what is required to pay the minimum rent.

Natural versus artificial percentage rent breakpoints

Purpose of the percentage rent

The purpose of percentage rent is to tie the tenant’s success to the amount of rent it pays and, therefore, to the landlord’s success. From the tenant’s perspective, it functions as insurance against hard times, lowering the rent it must pay if sales go down. From the landlord’s perspective, if the tenant does well, the landlord can cash in on that success too.

Pitfalls of percentage rents

While percentage rents seem to benefit both the tenant and landlord, there are some risks associated with this method.

Online shopping

The most common issue in recent times has been the definition of which type of sales constitute the basis of the percentage rent calculation. Do online sales count? What about online sales that are picked up in-store? How should product returns be handled? What if the item was purchased online, picked up in one store but returned to a different store? Online sales could potentially have much lower margins for the retailer than in-store-only items. The possible scenarios get out of hand very quickly. And the rapid nature of change online makes predicting and accounting for changes years into the future impossible to record adequately in a lease document.

Property valuations

Lenders use property valuations for mortgage limits based on the cash flows for the property. Rental rates that allow for monthly variability will result in lower valuation for the property. This is particularly true if there is currently an economic downturn. Property owners may find there is less financing available to them for properties with percentage rent leases.

Cash flows

With percentage rents, the rental rates lower immediately on slower sales instead of in the next leasing cycle. Pandemic-related closures resulted in immediate loss of cash flows for retail property owners. Using a simpler method of fixed rent increases provides greater certainty.

Increased accounting work

Tracking each tenant’s sales, returns and losses for each rent period for multiple categories of goods is a time-consuming process. A portion of the rent paid in advance and a portion paid retroactively further complicates the monthly rent reporting. Receiving the sales information from the tenant in a timely manner can be another problem. As well, the landlord may need access to confidential information if an audit of the tenant’s sales figures is necessary. Unless they are large tenants with sales numbers to justify the additional accounting work, it’s best to use a simpler method. That is the primary reason that percentage rents have nearly disappeared from common use.

The bottom line

When working as a property manager, remember you are in an ongoing business relationship with your tenants. Your success in business depends on the success of your tenants. The property owner’s success depends on the ability to manage the properties (whether privately owned or financed). The owner only receives a return on their investment if the properties are profitable. More than ever, we are all in this together.

Be reasonable

There’s an old adage that says, “When you go to court, only the lawyers win.” Therefore, it is in your own best interest to be reasonable in your business deals. Seek to foster an atmosphere of cooperation with your tenants. In fact, you are on the same side of the table when you face the property owner. It’s often not worth the time to track and calculate arbitrary limits when spending time clarifying the underlying concerns is the far better solution.

Be flexible

If the pandemic taught us anything, it is that the past performance doesn’t predict the future. Avoid unnecessarily encumbering either party for low probability events, questionable gains or because “we always have those clauses in every lease.” Don’t try to capture every low probability scenario. Instead, work out the major issues and put a resolution mechanism in place for dealing with the unforeseen ones. This is especially relevant for smaller landlords and tenants where legal costs will quickly make combative approaches unprofitable.

Be transparent

The best way to deal with uncertainty is to be able to trust your business partners. Trust requires clarity and transparency. CRESSblue Commercial Property Management software is specifically designed to accurately record transactions, automatically break down costs and be transparent to tenants and owners alike with audit trail reporting on every transaction. The easiest way for a property manager to achieve their goals is by using CRESSblue Commercial Property Management.


This article is for informational purposes only and is not intended as professional advice; please consult a competent professional for advice specific to you. This blog is written to stimulate thinking on concepts related to commercial leasing. Please join the discussion with your experiences.

Martin Sommer, CEO, CRESS Inc.

Follow me on LinkedIn

Martin is a founder and the CEO of CRESS Inc., a Canadian SaaS company that automates lease administration and asset management. Martin also manages Karanda Properties Limited industrial portfolio as Director of Operations in all areas of commercial property management, including new development, asset management, capital expenditures, operations, leasing and lease administration of the industrial portfolio. Martin writes about property management workflow and issues. Book Martin to speak at your industry event.

Making better business decisions with accurate financial reporting

Accurate Financial Reporting Helps You Make Better Business Decisions

2020 has been full of challenges. It’s probably even more important than ever to take a look at how your property management company measured up. Analyzing your data and looking at new ways to improve your financial reporting processes now can lead to more robust returns in the coming year. Here are some tips for calculating your annual profitability and enhancing success in the coming year.

Plan for a successful year. Track expenses. See the big picture. Utilize reporting features.

Track your expenses

Financial reporting can be time-consuming and complicated, but you can eliminate some of the frustration at audit and tax time by regularly keeping on top of your accounting. It’s important to keep track of your expenses efficiently to differentiate recoverable expenses from non-recoverable operational costs. Using property management accounting software like CRESSblue will help you automate your workflow and efficiently manage your financial reporting. It will enable you to create leases and automatically manage many (often complicated) calculations for you. This ensures that you always have the most accurate and up-to-date snapshot of your finances. 

So, what do you need to track? Basically, you need to record all property expenditures in your accounting books. If you use online software, like CRESSblue, you can digitize your leases and supporting documents and automate expense tracking.

Define recoverable versus non-recoverable expenses

Operating expenses can be broken down into two categories: recoverable and non-recoverable. Recoverable expenses are costs that can be billed directly back to the tenant or through additional charges on top of the monthly payments. In commercial real estate, tenants are typically charged on a proportionate-share basis for their share of the costs. Recoveries are also known as TMI (for taxes, maintenance and insurance recoveries) or Additional Rent (for total cost recoveries). If the lease includes the taxes and insurance in the base rent, the maintenance portion is often called Common Area Maintenance (CAM) charges. Recoverable operating expenses can include utilities, services such as trash removal and building repairs, specific site maintenance, such as snow removal, and more. 

Non-recoverable expenses are, obviously, expenses that cannot be charged back to the tenant. Non-recoverables include leasing fees, accounting and legal fees, marketing and administrative expenses, postage and courier charges, and any other costs directly associated with running the business that are typically excluded from the pool of recoverable expenses.

It is important to note that the definitions of what is recoverable for a particular property are specific to each lease. Within each lease, the definitions often change depending on what period of the lease is being reviewed.

Don’t forget capital costs and depreciation

Capital expenses are typically investments that provide a benefit for the future. For example, capital expenses include major renovations to a building or unit, material upgrades for longer serviceability, lighting upgrades, or furnace and appliance purchases. It’s also important to note that capital expenses should appear on the company balance sheet rather than as an expense line on the income statement.

Of course, capital expenses must be depreciated (fixed assets) or amortized (intangible assets) over time and cannot be deducted all at once. It can be tricky to determine which expenses qualify as capital costs and which are operating costs, but the Canada Revenue Agency has a handy chart that might help. You can find a breakdown of U.S. capital cost allowance rates here.

How to tell the difference

There are three main criteria for differentiating capital costs from operating expenses:

  1. Does it provide additional benefits or functionality?
  2. Does it extend the life beyond the original life expectancy?
  3. Is it part of or separate from the original asset (i.e. does have a different salvage value)?

If you answer yes to any of those questions, it’s likely a capital cost and not an operating expense. There’s one other thing to consider. That is, whether the expenses were done at the time of, and for the purpose of, a purchase or sale. If they were, then they are deemed to be capital in nature. Another indicator is the cost of the work in comparison to the original cost. A rule of thumb is that repairs over 10% of the original cost are likely to be capital in nature, but this isn’t a reliable indicator on its own. Make sure to consult with your accountant to determine which expenses to deduct. 

You must also factor the depreciation of assets into the accounting of capital costs. Typically, a property management company will only depreciate the buildings. However, certain types of equipment may also be eligible for depreciation. Rental properties may be eligible for the capital cost allowance (CCA), which is depreciation that can be claimed on your tax return. CRA groups depreciable properties into various classes that determine the deduction rate. You can find a full list of Canadian property classes here. For our U.S. readers, here is a breakdown of the IRS’s property classifications.

Some commercial leases allow for the recovery of amortization and depreciation of assets serving the premises. To recover these expenses, you will need to track those assets and their expenses as well. CRESSblue includes this functionality in its asset management and lease administration workflows.

See the big picture

Many property managers only track rental income and some expense recoveries, but there’s a lot more that commercial property managers need to review regularly. You may be able to make improvements in certain areas by analyzing your data and implementing new processes in your workflow. Here are some areas that you may not have previously considered in your financial reporting that could help you improve your profitability.

Analyze your expenses

Apart from tracking income, you should also take a long hard look at your monthly expenses. Look for ways you can maximize efficiencies by reviewing your costs versus revenue. For example, can you automate workflows to reduce administrative costs? Are you paying for online subscriptions you don’t use or use infrequently? Are you paying for services that can be moved in-house for more significant cost savings? Talk to your employees as well. Chances are they can highlight workflow, communication and other pain points, and offer valuable insights into critical areas for improvement.

Manage your budgeting

Vendors provide contracts and quotes that are the basis of the budget numbers. Property managers can take the time to use general ledger (GL) accounts to prepare budgets. Unfortunately, this forces you to manually calculate and allocate the budget amounts correctly to the chart of accounts. This is a big dive into the unfamiliar realm of accounting.

The property budgeting process in CRESSblue is unique in that it uses vendor and office expense accounts directly to prepare a budget. Accounting personnel simply set up the vendor and office accounts to automatically link to the GL accounts for budgeting, transaction expanse allocations and the additional rent reconciliation process. It’s another area of property management where CRESSblue stands out. It makes the financial reporting workflow more natural and intuitive for all user groups while also eliminating whole areas where errors can be introduced.

Review your lease clauses

Do your standard lease template clauses need to be updated to the current industry standards? Are all of the lease terms actually being correctly enacted? Do your signed leases have handwritten modifications that introduce liability-creating confusion and contradiction?

Another area to review is the rent provisions clause. Most commercial leases have provisions for rental increases during the term of the lease. Increases may also be based on annual adjustments for inflation or additional percentages triggered at various intervals. Without a regular review of the leases, these increases may be applied late or missed entirely. Using industry-specific accounting software such as CRESSblue can help you stay on top of potential increases by providing notifications of these increases or automatically applying preset rent adjustments.

If you haven’t reviewed your leases in a while, it’s time now. Ensure that you have the best leases when renewing existing tenants and signing on new tenants. CRESSblue provides implementation logic for industry-standard clauses and terms to help you bring your lease compliance up to current industry standards. Our team of commercial property management professionals are also a great knowledge resource.

Beware of slippage

Slippage is defined as additional rent that would be otherwise recoverable if all vacancies were leased, plus costs not recovered for various reasons. Let’s consider several examples of where slippage is triggered. First, expense allocations were accidentally missed and not added to cost recovery calculations. Second, invoicing errors made them ineligible to be allocated and collected. Third, eligible expenses are too difficult to manually calculate correctly and are purposely omitted from the reconciliation. Fourth, lease terms exclude expenses that are normally eligible for recovery, such as fixturing or free rent periods. Fifth, going over budget can also lead to slippage, especially on leases with expense recovery caps.

Common slippage errors in expense allocations, invoicing, eligible expense calculations, lease terms and budget overages

Automation that eliminates all guesswork

Using CRESSblue can help avoid these mistakes with the following automation:

  • CRESSblue automatically allocates ALL expenses—whether from vendors or internal expenses—to specific categories at the invoice creation level. There are no separate processes to be run later that might allow an expense to be missed.
  • Additional rent categorization occurs as the invoices are entered. Thus, invoicing errors, discrepancies and inconsistencies are identified before the invoices are paid. Invoice corrections can be requested immediately.
  • Cost allocations are calculated automatically—including common area gross-up factors and vacancy or overuse gross-up factors—without requiring any math skills or spreadsheet manipulation.
  • Automatic cost recovery logic is present for every individual period of the lease term and any extensions when the lease is created. As a result, all eligible costs are recovered automatically, even if they span multiple lease periods. Per diem calculations are done automatically to split the expenses accurately.
  • The default cost recovery method uses proportionate share calculations for all selected premises. Alternatively, you can use an equal share calculation method. Costs can be allocated to common areas and automatically allocated to the leases with access to those common areas. A Building Transaction report will list all the transactions tagged to the building and also all the recoveries and the unrecovered slippage amounts. On the transaction level, the Additional Rent Distribution report will break down the cost allocation in detail and specifically identify the amounts and reasons for each allocation based on the property and lease period settings.

For a more in-depth overview of slippage and how to avoid it, read this article.

How much is that vacant property really costing you?

When an investment property or unit sits empty, it is not generating income. But you still incur other expenses while the property remains vacant, such as utilities even though no one is there to use them. For example, in winter, you must keep the heat on to avoid freezing pipes. In addition, insurance can be significantly higher when properties remain empty. Factor these expenses into your financial reporting to ensure you have a clear picture of where your business stands from a revenue perspective. 

What is the current average vacancy rate for similar properties? Are you within range, or is your vacancy rate higher than the market rate? If so, it’s essential to understand why.

Vacancies may be due to economic conditions, such as the current pandemic. The economic downturn has created a lack of demand for some retail spaces. However, other industries have had an uptick in need, such as healthcare and warehouses. Is there a way you can repurpose your vacant premises to better suit one of these types of tenants? 

Vacancies may also be due to poor property management or overpriced rent. If you see an ongoing vacancy pattern, consider taking a survey of your current tenants to assess whether they feel there could be improvements to the services you are offering. Ask a realtor to walk your property with you to get expert feedback from a fresh set of eyes. Determine whether your rents are pricing you out of the market by doing some market research and competitive benchmarking. To improve the situation, try to determine which factors are driving your vacancy rates. 

Tenant improvement allowances

Tenant improvement allowances are often incentives for commercial properties to encourage prospective tenants to lease a space. Tenants usually prefer to customize their offices to ensure the property suits their needs. As such, the improvement allowance provides an opportunity to make the space their own and create a fully functional space for them to work in. However, these allowances may end up being costly for property managers.

Alternatively, some tenants may request a turnkey buildout instead. In this case, the property owner is responsible for both financing and completing the negotiated improvements before the tenant moves in. This arrangement is often negotiated with a higher lease rate, which can help offset some of the renovation’s upfront costs. This article has a good explanation of how it works in Canada. Details on the U.S. tangible property regulations are available on the IRS website.

Leasehold improvements are accounted for differently depending on who pays for the upgrades and who owns them. There are several ways to assign costs, as well as numerous potential issues. For more detailed information about this subject, read this article here.

If you own the building, you may be able to claim these expenses as capital costs. Maintaining detailed financial reporting will ensure that you have the information you require to back up your expense claims. Software like CRESSblue makes financial reporting easy.

Tenant defaults

There are many reasons why a tenant may default on rent. Even a strong performing tenant may suddenly experience a downturn in business. And as we’ve seen throughout the pandemic, more and more companies have been forced to shut down due to drastically decreased income.

In normal circumstances, after a tenant misses several payments and communication breaks down, a landlord may decide to either enact distress or forfeiture.

However, with the unusual circumstances around the pandemic, you might wish to exercise more leniency and compassion for tenants, especially for small to medium-sized business owners who may end up losing their livelihoods as a result. As a temporary measure, you can seek out rent assistance.

The Canadian government established an emergency rent assistance program that benefits both tenants and property owners of commercial properties. The program will run until June 2021. A previous program, the Canada Emergency Commercial Rent Subsidy, was administered by CMHC but has since closed. To determine whether your business is eligible for the subsidy, visit the CRA website. Currently, there is no emergency assistance program for property owners in the U.S. that we are aware of.

Utilize financial reporting features

Most accounting software packages provide reports that you can use to analyze your data. Reports can show you profit and loss at a glance, cash flow trends, as well as where you stand with accounts receivable and accounts payable. 

Review reports monthly to ensure that you stay on top of your financial situation and make any necessary adjustments. For example, you can also identify how much you spend monthly and identify areas that should be scaled back or cut altogether if investments do not provide a solid return on investment as expected.

Property managers need more than basic accounting reporting

Critical report types

Beyond this basic accounting reporting, commercial property managers need comprehensive lease administration reporting. Report types that enable property managers to make better decisions include:

  • Budgeting reporting that delivers accurate projections based on vendor and office expense accounts.
  • Building transaction reporting that lists all transactions related to the building and both recovered and unrecovered slippage amounts.
  • Additional rent distribution reporting that breaks down cost allocation in detail and identifies amounts and reasons for each expense based on property and lease period settings. 
  • Additional rent annual reconciliations with automated reporting and invoicing. Never leave properties unreviewed and unreconciled again.
  • Leasing status reporting that provides data on leasing activities and building vacancies.
  • Rental advisory reporting that combines information on base rent, additional rent, property details, loan repayments and lease information.
  • Lease abstract reporting that provides lease details in a snapshot format. 

CRESSblue delivers this financial reporting automation and more. It provides several data areas and reports that collectively describe a comprehensive workflow and reporting process. With it you can eliminates the reasons for voluntary slippage and, as a resultant, avoid all avenues of accidental slippage. Also, CRESSblue can be customized to distribute reports automatically on any schedule. Establishing best accounting practices and financial reporting processes will help you stay organized and informed. Leveraging property management software like CRESSblue can help you capture all expense recoveries, increase productivity and reduce errors. Take the time now to review your finances and build a stronger, more resilient business in the coming year.


This article is for informational purposes only and is not intended as professional advice; please consult a competent professional for advice specific to you. This blog is written to stimulate thinking on concepts related to commercial leasing. Please join the discussion with your experiences.

Martin Sommer, CEO, CRESS Inc.

Follow me on LinkedIn

Martin is a founder and the CEO of CRESS Inc., a Canadian SaaS company that automates lease administration and asset management. Martin also manages Karanda Properties Limited industrial portfolio as Director of Operations in all areas of commercial property management, including new development, asset management, capital expenditures, operations, leasing and lease administration of the industrial portfolio. Martin writes about property management workflow and issues. Book Martin to speak at your industry event.

Data protection

Data Protection: Now More Important than Ever

Data protection is increasingly more important for businesses as cyber attacks become more frequent and more destructive. The number of attacks has increased as hackers have taken advantage of the work-from-home model adopted during the pandemic. According to Fintech News, 80% of businesses have seen an increase in attacks this year. Without reservation, hackers look for vulnerabilities between home and office networks to steal sensitive data. As we’ve discussed previously, remote work isn’t likely to be going anywhere soon, so it’s vital that you boost the security of your systems to defend against potential damage. And let’s be honest: if you are still using customized Excel spreadsheets and off-the-shelf accounting packages, your system is most likely at risk.  

One way to combat these threats is to move to cloud-based applications and storage. Depending on the foundational hosting platform, the cloud can offer increased protection from malicious forces. Business applications like CRESSblue provide additional security features to help secure your data by partnering with a strong, leading-edge hosting platform.  

While adoption of this trend continues to rise, it can still be nerve-wracking to make the leap. We know you probably have a lot of questions: What kind of protection does the cloud offer? Does the hosting service have access to my data? Can the cloud really protect from attacks?  

Let’s take a look at how CRESSblue and its built-in security features compare with a traditional in-house set-up.

Enterprise-level data protection at a fraction of the cost

Without a doubt, information sharing through Excel and email increases the risk of security leaks. With a cloud-based solution, the hosting platform features built-in data protection. CRESSblue uses Microsoft Azure’s cloud-computing platform to host our software. Microsoft is a trusted name and one of the top three major cloud-based hosting services in the technology industry. We selected Azure as a preferred service for our products due to their commitment to cyber security and robust protection features. Achieving such high-level security in-house would require a huge investment of both time and money. And even then, the strength of the data protection would only be as good as the weakest link in your system. While no security system is bulletproof, you will enjoy the benefits that come from partnering with an industry-leading giant in the technology field.

Control access to sensitive data with defined access and permissions

Roles ensure the right people see the right data

Manage your risk by ensuring that only authorized personnel have access to sensitive data. It’s easy to do with CRESSblue. How? Permissions control who has access and maintain a hierarchy of role-based security clearance. In fact, users may have varying levels of access depending on their level of responsibility. Every process is role-based and requires separate permissions for data entry and approvals. You can also set up separate permissions for viewing and editing.

Give careful thought to the designation of user roles. Review each employee’s role and the type of information they need to access daily. Think about the levels of access they require.

For example, different types of roles may include:

  • Administrative for general use
  • Management for approval processes
  • Tenant users for administration or accounting
  • Owners with access to property-specific reports
  • Technical support users

You can determine exactly how much data each user can view and edit by defining these roles. By implementing role-based access control, your company can save time and reduce red tape. This is especially true when new hires come on board or when an employee changes their role. You can easily revoke access when an employee leaves the company or buildings change ownership. In like manner, you can assign pre-determined roles and access through external portals to third-party users. This avoids the need to set them up on internal systems. Administrators can also provide multiple role permissions for users who may need specific data for a time-based project. And, later remove them once the project is complete.

Additional layers of data protection provide stronger security

Passwords alone will not keep hackers out. For that reason, multi-factor authentication is another feature that can provide added security. This requires the user to perform a second step of verification to complete the login process. This step may include answering a security question. Or, it may involve entering a personal identification number, biometric or token. CRESSblue also uses a second device and authentication app. In short, this reduces the risk of a single device being hacked or stolen to gain access to sensitive data systems. Once the user has been authorized, CRESSblue uses short-lifespan security tokens to confirm the identity of users. This is similar to the way a bank uses tokens to secure your session for online banking. It contains information about the user and the level of access permitted. Unauthorized users are denied access without a token.

You can configure the system in a variety of ways. It can remember the user device, so it does not require validation each time. It can have the authentication expire after a period of time or it can require two-factor identification every time the user logs on. Password strength is enforceable on several levels and a single password sign-on is disabled. You can also configure password change schedules, as well as trigger system lockouts after several failed sign-in attempts.

We’ve got your back(up)

Automatic and frequent cloud backups mean there is no need to schedule regular in-house system backups of your CRESSblue data. This means your IT department can focus on other tasks. Moreover, there’s no need to house physical storage units, saving your business time and money.

Cloud backups can reduce the risk of data loss

In the event of a data emergency, your systems can be easily and quickly restored. Your data is stored on the cloud and is mirrored to at least two physical locations. On the other hand, recovering files from a local office server may not be so simple. This is especially true if the storage units are physically damaged. In addition, data from individual devices may not be captured in the recovery. And this is assuming that you have a dedicated IT department. At smaller firms, staff may be backing up to easy-to-lose external hard drives. Or, worse, staff may not be making daily backups at all.

Privacy is not an issue

Your tenants trust you to keep their personal data safe. But are you confident that you can keep their information safe with your current systems? Similarly, proprietary corporate data is the lifeblood of the organization. Any breach of this data can be harmful to the business. With the data protection offered by CRESSblue, only those who have authorization can access your files. Your company holds all rights and interest in the data stored online. Equally important, the hosting service does not access your data in any way. Embedded privacy controls ensure that no unauthorized users can view your data. Multi-level authentication and access control enhance data protection.

Data protection from viruses and malicious attacks

Hackers are becoming more sophisticated, but security has also become stronger. The hosting platform uses a variety of security measures that work with browser security. Plus, our network architecture features multi-layered security features that provide robust protection against any external threats. The CRESSblue database is layered behind the hosting software. This means that unauthorized users can only interact with the front-end web browser portion; they do not directly access the database. 

Any data put into the CRESSblue software entry fields is validated before it is written to the database. This helps prevent any unusual or malicious uploads from infiltrating the databaseFurthermore, the hosting platform also includes real-time intrusion detection monitoring. The support centre is instantly alerted to any suspicious activity on our client accounts. If any threats are detected, automated steps are taken to react to the situation immediately.

Centralized data

Remote work is the new norm, and thus it is more important than ever to ensure all employees can access your systems anytime, anywhere. Truly, cloud-based solutions can make it easier for staff to work remotely because they are much easier to implement than on-site systems. Sure, remote workers can access in-house documents by VPN software. However, it often slows down the computer or experiences frequent connection breaks. Besides, not all VPN programs are compatible with different types of computer systems. You can easily use any device, including tablets and smartphones, to access cloud-based software.

Centralization keeps one set of data updated with the latest information. Consequently, this avoids duplication of work and increasing efficiency. Have you ever had an employee go off sick or leave the company, and no one could access their files because they didn’t know their computer password? With cloud-hosted files, that’s no longer an issue. Anyone with administrative permissions can access user files and assign them to a different staff member.

Data distribution

Unfortunately, security features can’t prevent staff from deliberately sharing information with external contacts. Similarly, it can’t stop them from using insecure methods of data transfer in their workflows. What does this look like in practice? It can be as simple as saving a file to their device and emailing it to a legitimate contact. In that simple process, multiple avenues of risk exposure may be created. Did they use a secure network or was it a public-access open network like an airport lounge? Was their device secure or was it a personal device without any protection, like their phone or family-use tablet? Also, email is not a secure or encrypted method for transferring personal or confidential data. Did the right recipient get the data, or was it accidentally sent to the wrong person? So many things could go wrong in that very common workflow!

CRESSblue uses document distribution systems to secure portals. This does several security tasks for you. One, document distribution rules can prevent documents from being sent by someone without the correct authorization, and to someone without the correct credentials. Two, documents can be restricted to internal use only. Three, if the documents are permitted to be shared externally, they are sent to a secure portal and the user gets a notification to access it, just like getting a notice your bank statement is available for viewing at your bank website. The entire workflow and document distribution process is secured within the system.

Secure document distribution systems protect your data

It’s important to do your part too

All the world’s security features won’t keep you safe in the cloud if you haven’t identified vulnerabilities on your own network. That’s why it’s crucial to ensure that you use preventative measures to safeguard your data. Think your business is too small to be targeted? Think again. Nearly half of all data breaches target small to medium-sized businesses.

It’s also important to note that not all threats are from external malicious forces. IBM’s recent “Cost of Data Breach Report 2020 showed that while 42% of Canadian data breaches were caused by malicious attacks and 35% were due to system glitches, 23% were also attributed to human error. Sharing confidential information with the wrong person, clicking on a phishing link, not updating internal security programs and incorrect authorizations can all expose the system to a data breach. That’s why it’s essential to make sure employees follow proper computer protocols to prevent breaches from happening in the first place.

There are several ways that you can reinforce data protection from the local level:

  1. Have employees update passwords to company systems regularly. According to the 2019 Verizon Data Breach Report, 80% of all cyber attacks involve a weak or stolen password. Changing passwords frequently reduces the chance that hackers can steal these credentials. Enforcing unique passwords with multiple character requirements will also help keep them secure. The best passwords are at least 10 characters long and include upper- and lower-case letters, symbols and numbers.  
  2. Install anti-malware software on all of your computers or your network. All it takes is one employee to accidentally click on a very real-looking email that contains a virus to bring the whole system down. Anti-malware software identifies threats and removes them before they have a chance to infect your computers.
  3. Keep your software updated to ensure you have the latest version of the programs you use regularly. Updates often include security fixes as well, thus eliminating potential wormholes for attackers to enter. Don’t forget to install patches when required to eliminate bugs that may make weaken the system.
  4. Make sure all devices are updated too. Any device used to access your systems – from desktops and laptops to smartphones and tablets – needs to be patched and updated regularly. An insecure device has the potential to expose a hole in your security.
  5. Secure your Wi-Fi systems. And that doesn’t mean just adding password protection. It should also be both encrypted and hidden. Leaving your Wi-Fi open provides a gateway to your network and leaves the system vulnerable to cyber attacks. Activating network encryption, adding a firewall and changing the router’s default settings will all help to secure the network.
  6. Provide training for your employees to help them recognize security threats. Likewise, make them aware of best practices to keep your clients’ data safe. Training should include how to identify phishing scams, ransomware, spam and malware. Further, it should cover avoiding the use of open public-access Wi-Fi networks, as well as the importance of password security. Consider integrating cyber security training into your onboarding processes and running a refresher every couple of years.
  7. Create a computer use policy covering rules and guidelines for password protection, Internet access, data transfer, email precautions and compliance or legal concerns. Outline clear expectations and provide details as to what constitutes appropriate use and what does not. Employees are on the frontline of defence. Further, make sure you engage them in the policy’s development so they feel like they are part of the process and want to protect your assets. Instilling the right mindset from the top down will go a long way to encouraging employees to do the right thing.

Taking these precautions will help mitigate the risk of a threat to your computer systems. And moving your business processes to a cloud-based application will vastly improve your security.

Don’t take chances with your data. With CRESSblue, you can rest assured that you are upgrading your business systems to a world-class technology solution backed by enterprise-level data protection. Book a demo or schedule a call to learn more about our security features.   


This article was accurate as of December 2020. Technology is always advancing. CRESSblue specifications are subject to change without notice. Always check with your CRESSblue account administrator and your contract terms for the most current specifications. This article is for informational purposes only and is not intended as professional advice; please consult a competent professional for advice specific to you. This blog is written to stimulate thinking on concepts related to commercial leasing. Please join the discussion with your experiences.

Martin Sommer, CEO, CRESS Inc.

Follow me on LinkedIn

Martin is a founder and the CEO of CRESS Inc., a Canadian SaaS company that automates lease administration and asset management. Martin also manages Karanda Properties Limited industrial portfolio as Director of Operations in all areas of commercial property management, including new development, asset management, capital expenditures, operations, leasing and lease administration of the industrial portfolio. Martin writes about property management workflow and issues. Book Martin to speak at your industry event.

CAM Slippage and how to avoid it.

What are CAMs and How to Avoid CAM Slippage

What are CAMs?

Before we dig into CAM slippage, let’s get clear on exactly what CAMs are. CAM stands for common area maintenance. Property managers of multi-tenant office, retail, industrial and warehouse properties typically use net leases. Such net leases recover from the tenants the operating costs for shared common areas separately from the base or minimum rent. These operating costs for shared common areas are the “net” portion of the lease. They include taxes, maintenance and insurance (TMI) that cover the property and building, as well as other overhead expenses and depreciation. CAM (again, the common area maintenance) is part of this TMI (though CAM is sometimes used to refer to TMI). While CAM costs are primarily operational expenses, portions of capital expenses are sometimes also recovered from tenants. The total cost recoveries are often referred to as Additional Rent in the lease agreement.  

What is CAM slippage?

Slippage is the difference between the total operating cost of the property and the amount recovered from tenants. It represents the often-preventable losses incurred from various sources. What causes CAM slippage, and how can you avoid those losses?

There are two broad causes of CAM slippage: voluntary and involuntary. Surprisingly, much of the slippage occurs directly from voluntary actions on the part of the property manager. We will look at the voluntary reasons first.

Voluntary reasons you’re experiencing CAM slippage

1. Going over budget

Ideally, as a property manager, you want to hit your property budget exactly. That way, the annual reconciliation statement and accompanying invoice for the shortfall in their instalment payments won’t surprise your tenants. Property managers may look for ways to avoid confrontation when budgets exceed targets by large amounts. They may simply elect to not recover the excess over the instalment payments. In other cases, annual reconciliations remain incomplete. This often occurs for leases that use a Base Year of CAM expenses to determine the annual additional rent that will be typical for the lease term. While provisions are included in the lease to recover any costs in excess of the base year, very often no reconciliations are made. Leases that use a base year for additional rent invite lazy property management behaviour that is costly. 

So why are budgets missed?

  • No budget was made. More accurately, no budget planning was done at all.
  • Budget items were missed. It’s relatively easy to miss an expense item, even if you normally incur that expense. This type of error is easily introduced when using spreadsheets; all it takes is a missed cell in a formula calculation range.


Use software that automatically builds a property budget based on previous expenses for that property. The entire budgeting process is greatly simplified, no previous expense items are missed, and no calculation errors are possible. There is no need to avoid budget excess embarrassment and take a voluntary hit on CAM recoveries.

2. Unallocated costs

Annual reconciliations of additional rent are supposed to determine the difference between the actual expenses incurred and the tenant instalment payments estimated in the property budget. So how do reconciliations expose the property manager to slippage?

Quite simply, if the expense allocations are only looked at annually, it can be difficult to figure out what the invoices are for and who should be paying for the expense. Typical examples are:

  • Service invoices without a service address. This is especially problematic when a contractor provides services at more than one property. Where was the service performed? Which property does it apply to?
  • Invoices with mismatched data. What happens with an invoice where the tenant name and the service address aren’t consistent? Which is correct?
  • Invoices where the services description is not clear, and it cannot be determined if the cost recovery is allowed under the terms of the lease(s).
A service invoice with errors that may result in incorrect tenant billing and CAM slippage
Above is one example of a real-life invoicing error. The service tenant name and address are incorrect at the top, while the correct tenant unit number shows in the description area. How likely is it that the wrong tenant would have been billed for the service call? Had the property manager entered it into the system right away, this error could have been corrected quickly. Instead, the tenant may eventually dispute it, and it will be difficult to correctly sort out months from now.

In cases like these, property management companies often take voluntary slippage on sloppy paperwork or lose out on disallowed expense claims as a result of a tenant’s expense audit.


Cost allocations should be made when the bill is entered into the Accounts Payable ledger. That is when the memories are still fresh. Moreover, vendors will correct the bills so that the information is clear before payment is made.

3. Difficult CAM breakdown calculations

While the base rent is a relatively straightforward calculation, the CAM allocations are anything but. We’ve previously covered the complexity in another article. Typical complications are variable expense gross-ups, partial expense periods due to lease commencement and expiry, area gross-ups and rentable area changes.

When the CAM allocations are very complex, property managers often use low-ball estimates to include a “safe” amount of the expense in the CAM statement “that will surely be acceptable” to the tenant as it is obviously below the correct amount.


Our CRESSblue team finds these types of voluntary slippage decisions frequently. Interestingly, the slippage amount is often more than the annual cost of using software to automatically do the calculations. Your property management software solution should do the math for you without requiring spreadsheets or calculators.

Involuntary reasons you’re suffering from CAM slippage

4. Missed expenses

Simply missing expenses for recovery as additional rent is a type of involuntary slippage. Indeed, this easily occurs when the property management system does not tie invoices to properties. Recurring transactions are relatively easy to track, but one-off expenses are easy to miss in manual spreadsheet-based systems.

Credit card receipts are good candidates for accidentally missed expenses. They typically do not have enough information to identify the items and do not include a service address or a tenant name. The receipts end up being overhead expenses rather than additional rent. Also, they often get lost.


Firstly, make sure billing is detailed enough to serve as a receipt that can stand up to audit scrutiny. Use commercial vendor accounts that require additional information such as the service address and full descriptions of the items and services purchased. Secondly, use a property management software solution that requires categorizing the expenses at the time of entry. As a result, this makes it impossible to pay a bill and forget to recover the expense. CRESSblue has both a simple-to-use system for allocating costs and an automatic rebilling function for direct expense recovery from a tenant.

5. Lease language

Leases often contain language that lease administrators don’t actually understand. As a result, they never utilize and realize the benefits of many of the lease document’s negotiated terms.

Grossing-up of variable costs

A frequently occurring example of this is when the additional rent allows for the variable costs to be grossed-up to account for disproportionate usage when the subject property is not fully occupied:

In computing Operating Costs, if less than one hundred percent (100%) of the Rentable Area of the Property is completed or occupied during any period for which a computation must be made, the amount of Operating Costs will be increased by the amount of the additional costs determined by the Landlord, acting reasonably, that would have been incurred had one hundred percent (100%) of the Rentable Area of the Property been completed or occupied during that period, provided that, for greater certainty, it is confirmed that in no event shall the Tenant’s Proportionate Share of Operating Costs be increased pursuant to this section beyond the amount that would be payable if the Property had been fully rented.

Even though most commercial leases contain similar language for the same effect, administrators often do not separately track the variable expense portions. Moreover, no accounting is made to recover these costs solely from the occupied areas. As a result, they are allocated to unleased portions of the building as vacancy expenses when, in fact, they are legitimately recoverable from the tenants using those services and utilities.

Expense caps

Negotiators often use complicated verbal formulas and expense caps to reach some consensus on what an equitable distribution of costs should look like. Essentially this is a trust issue. The tenant does not believe that clear documentation is available to them to ascertain the costs’ correct calculation. However, very often, the documentation that enables the use of the lease formula is missing. Indeed, consider this example:

The Tenant’s proportionate share of the operating costs that are under the Landlord’s control shall not exceed 105% of the payment for such costs the previous year.

This statement requires that the landlord track the operating costs under its control separately from those that are not. One would suppose that those not under the landlord’s control would be realty taxes and property insurance. There are numerous ambiguities with that clause. Does “such cost” include only the similar costs year after year? To put it another way, how do you handle an additional required service that isn’t in the prior year’s basket of costs? Alternatively, what if a union strike unilaterally forces wage increases on the landlord above the 5% increase limit? Are those included in the cap as well?


Without reservation, negotiate lease terms from a practical standpoint. When the labour to track and calculate the amounts cost more than the additional rent recovered, you may incur losses negotiating for extra rent. Use lease administration software that automatically tracks and recovers, or limits the recoveries. Lease abstracts don’t include boilerplate lease terms. So, they can slip by unnoticed. Your software solution should have the accounting logic and mathematical ability to conform to your lease agreements’ terms.

6. Asset tracking

While similar to the lease language issue, this one deserves a separate mention due to the solution’s scope and the large cost recoveries that it implies. The language included in the typical lease definition of the operating costs look like this:

… depreciation or amortization of any capital repairs and/or replacements made by the Landlord to the Property and or Premises, …

What does the inclusion of this language imply? Asset tracking. Capital repairs and replacements are added to the property’s asset value and amortized over that equipment’s expected lifetime. The landlord needs to track those assets and calculate the amortization to add the depreciation and amortization to the tenant’s operating costs recoveries. The tenant in this lease expects charges for capital costs made for or during its own tenancy, but not for those associated with the previous tenants. Are those costs significant enough to warrant the effort to track and calculate the depreciation and amortization expenses? For a rooftop HVAC unit, installed costs of $15,000 over a 15-year lifecycle would amount to a straight-line depreciation cost of $1,000 per year that could be recovered.


Use a property management software system with asset tracking that can automatically invoice for the amortization expenses permitted in the terms of the lease agreement on the monthly rent invoice.

Property management solutions

Evidently, CAM slippage is easy to incur both voluntarily and involuntarily. Specialized commercial property management software can significantly improve these situations. Is the software expensive to licence? Not at all in comparison to the CAM slippage costs. In fact, using dedicated software can increase profitability. Also, it provides peace-of-mind with clear documentation and accurate calculations.

Likely, active leases are not alterable. However, you can take action to implement the current agreements’ terms. Additionally, understanding how to fully realize lease clauses’ implications enables you to better negotiate for future leases. What is holding you back from being better?


This article is for informational purposes only and is not intended as professional advice; please consult a competent professional for advice specific to you. This blog is written to stimulate thinking on concepts related to commercial leasing. Please join the discussion with your experiences.

Martin Sommer, CEO, CRESS Inc.

Follow me on LinkedIn

Martin is a founder and the CEO of CRESS Inc., a Canadian SaaS company that automates lease administration and asset management. Martin also manages Karanda Properties Limited industrial portfolio as Director of Operations in all areas of commercial property management, including new development, asset management, capital expenditures, operations, leasing and lease administration of the industrial portfolio. Martin writes about property management workflow and issues. Book Martin to speak at your industry event.

Work From Home For Property Managers.

Work From Home for Property Managers

It seems that to be truly relevant, back in 2020, every communication must include the words “unprecedented” and “global pandemic.” This has certainly been the case for news articles of recent. We sincerely hope that those words become less frequently used as time passes. With some pandemic life experience under our belts, we can now regather and reprioritize as we look forward with somewhat more experience and context.

While the impact of the pandemic on the working environment was sudden, all indications are that the effects will be with us for at least a year. Some are likely here to stay. Let’s take a look at those impacts and what we can do about them as commercial property management companies.

Immediate impact

The immediate effect has been the Work From Home (WFH) policy implemented nearly universally. This has done several things right away:

  • There is a need for digital online systems. Work From Home had a paralyzing impact on those that didn’t already have cloud-based systems in place. On the other hand, those that did transitioned much more easily into remote workflows.
  • Larger companies have frozen travel and group training budgets.
  • Forced business closures impacted commercial property management revenues by about 5% in the first month of the shutdown alone.
  • Most property management companies have put new capital projects on hold for the remainder of the year.

Middle-term impact

Not everyone will be returning to an office workplace

The initial response in various social media and news outlets was that the shutdown is just temporary, and things will revert to normal as soon as the shutdown is declared over. It is now apparent that the shutdown situation will end in phases. This will have several middle-term effects:

  • Revenues will continue to decline and will likely accelerate as the cascading economic effects impact more businesses and individuals.
  • There will be a strong realization that waiting this out is not a viable strategy. There will be months of people working from home still, and there will need to be greater efficiency and online capabilities for companies to survive this environment.
  • Not everyone will be returning to an office workplace. Some of the population will have significant fears about crowded workplaces and will refuse to go back.
  • High traffic events like trade shows and group training will be cancelled farther out as event attendance budgets are withdrawn for both presenters and attendees.
  • Print media will be refused in favour of contactless digital media to avoid spreading the virus.
  • Some previously crowded offices will not be able to fit everyone back in due to the social distancing in the workplace requirements. Shared workspace policies like “hot-desking” will end.

Long-term impact

Just as generals always prepare to fight the last war, companies will plan for the next crisis in response to this one. We expect to see a strong push for online software, with full capabilities for document creation and handling. There will be a need for role-based permissions within the software so that workflow processes and authorizations can be completed without physical presence requirements.

Let’s review a few of the critical aspects that a digital solution must provide.

External communications

Companies “going digital” used to mean scanning paper documents and storing them on hard drives. Interestingly, for property management companies, the original signed copy of a lease is still considered the only official version of the document, and it is kept in a “safe place” like a filing cabinet or at a lawyer’s office. A short lease abstract is referred to for daily tasks such as rent payments and lease dates referencing.


Although many professionals, such as realtors and lawyers, now support digital documents, these materials are nearly universally transmitted by email. However, as email is not a secure form of communication, this opens up opportunities for fraud. What is needed are online portals whereby authorized users can log in and access documents securely. Tenant and property owner portals can support secure document access. A tenant portal should include two types of user roles: an administrative role and an accounting role. This allows for the separation of access for accounting related items like bills and payments and administrative tasks such as lease options and extension notifications.


Handling service requests from tenants has become significantly more difficult with the shutdowns and Work From Home policies. Many service requests for non-critical repairs are unable to be fulfilled as nonessential companies are not operating or operating at decreased capacity. This has resulted in a backlog of open service requests that need to be maintained and eventually prioritized for the service crews when nonessential work is permitted to resume. Also, service requests that were previously phoned into the main office are no longer able to be physically distributed to maintenance staff if everyone is working from home. In general, all direct communication has been replaced by other methods that were readily available such as email and online meetings. The critical solution is an internal messaging and portal system. Such a system allows tenants to create service requests that can be prioritized by your staff and shared internally with other users.

Interoffice workflows

Internal document management

Many service providers have previously switched over to emailing PDF versions of their completed work orders and service invoices. Some progressive companies also email before and after pictures of the work areas to prove they completed the required work. These enhanced services have been handy in reducing the number of follow-up site visits required of building managers.

What happens to these documents when no one shows up in an office? How do cost allocations get assigned, and how are approvals given if no one physically stamps or signs off on the invoice? This is where role-based permissions are required. CRESSblue, for example, allows for the entry of accounts payable invoices, automatic allocation of expenses and attachment of all original supporting documents with a simple drag-and-drop upload to the cloud. Notification systems alert the appropriate users to let them know there is work in their queue awaiting their review and approval. Go ahead and score yourself some bonus points for having every bit of the document processing available for an audit.

Your business system should include document management for leases and property data. On the property level, design drawings, equipment manuals, finish specifications, furniture layouts and photographs can all be stored and catalogued on the internal file storage system. For leases, scans of original signed documents, digital versions, notices, letters, lease extensions, addendums, anything and everything you used to keep in a filing cabinet can now be stored securely and accessed from anywhere by anyone with the correct user permissions. The digital workspace can be as distributed as everywhere and still fully connected. The significant advantage is that digital systems are far more efficient. The result is no lost documents and uses far fewer employee hours than processing paper files.

Digital document distribution supports efficient remote work

Staff communication

While messaging apps are ubiquitous on phones and computers, what they lack is the ability to link to office workflows centrally. Property management software that has internal messaging systems to coordinate and direct remote office staff has a clear advantage. Messages are secured within your company, and all staff can communicate together easily without disclosing personal information to co-workers.

Software with a complete, built-in messaging and notification system supports Work From Home.  This functionality allows for communication between remote staff, property owners and tenants, all contained within a secure company environment. While accidentally shared files and correspondence may make for funny social media posts, they can be disastrous on both a personal and a corporate level. Take confidentiality seriously and use professional systems to facilitate your office communications.

Another advantage of using integrated messaging systems is that they can also incorporate system notifications. In addition to automatically triggering notifications to specific workflow events, they can provide timely reminders of lease events to both lease administrators and tenants.

Work reassignment

A global pandemic can create unique challenges when large percentages of the workforce are suddenly unavailable. While actually getting sick is the most severe case, many other situations can cause disruptions in staff availability. Caring for others who are sick, those who are high-risk and self-isolating and children unable to go to school or daycare can make healthy employees unable to work their usual hours. This can create stressful bottlenecks in integrated workflows and results in significantly slower processes.

The beauty of online systems is that you can easily redistribute work. There is no need to email files or share spreadsheets and keep your fingers crossed that the changes will merge correctly. As a manager, you can easily reassign permissions and notifications to redistribute the work among available staff. When fewer people are required to be more efficient than they were previously in a physical office environment, a smart online system is essential.

But can your team learn the necessary skills and procedures quickly to complete the newly reassigned work? A well-designed system includes integrated help and training systems with definitions, explanations and best practices. In addition, it has a parallel user-enabled system whereby you can add your company policies and procedures in the same context-sensitive way.

Integrated systems

As we have seen so far, the key to Work From Home is to have everyone connected digitally for their workflows. This is also true for software systems.

Orphaned data

Paper-based systems and stand-alone applications are examples of siloed systems. The data contained within each silo is difficult to share and, once separated from its source, is impossible to update or verify. Each piece of data becomes an untraceable orphaned copy of the original. Any error introduced at any point will propagate through to all decisions based on that data. Centralized, single-source data systems combined with the original documentation permits the data to be much more valuable and to maintain its credibility.

Centralized data systems support easier sharing and verification

There isn’t one single software application that does everything for any company size or specialization. Often industry-standard systems like QuickBooks are used for the accounting portions of business operations. This specialization permits accountants to work on a limited number of familiar systems and increases their efficiency. Other systems, such as online banking, have security requirements that make them the only provider of their banking services.

Automation through integration

Thus, various software systems must be able to integrate. This compatibility eliminates the need for a human to be the sole interface between them and results in greater efficiency. QuickBooks Online is doing an ever-increasing good job of integrating with online banking software. Bill payments, payment receipts and reconciliations for bank accounts and credit cards are all possible. Automation is increasing the speed and accuracy of the banking/accounting work.

By switching to a business system that has built-in integration with accounting systems, you will vastly improve data quality and workflow efficiency. Specialized applications within CRESSblue, for example, permit automated processing of tenant rent invoices and third-party property management fee invoices. These are transmitted live to the online accounting software, and payment statuses are updated in real-time. From a user perspective, these functions occur as if they were one system. Effective integrations allow each user to perform at peak efficiency on their native software choice.

Work From Home is here to stay

The recent abrupt changes have surprised everyone. Aside from the terrible impacts of the disease itself, social distancing and shutdowns are our new reality. The Work From Home environment is here to stay for a while. The overall economic impact is very uncertain.

The impetus for changing business environments is here. We already face economic hardship, uncertainty and fear. These things are part of any major change in business operations. The question, therefore, is not when will we respond, but what will we do now to survive? The companies that will withstand the current situation are those that promptly adapt and change to meet the new requirements. The stress is already present. Moving to more capable systems will only make the stress go away sooner. Move quickly to position yourself for survival, and you may also find that you also have the opportunity for growth.


This article is for informational purposes only and is not intended as professional advice; please consult a competent professional for advice specific to you. This blog is written to stimulate thinking on concepts related to commercial leasing. Please join the discussion with your experiences.

Martin Sommer, CEO, CRESS Inc.

Follow me on LinkedIn

Martin is a founder and the CEO of CRESS Inc., a Canadian SaaS company that automates lease administration and asset management. Martin also manages Karanda Properties Limited industrial portfolio as Director of Operations in all areas of commercial property management, including new development, asset management, capital expenditures, operations, leasing and lease administration of the industrial portfolio. Martin writes about property management workflow and issues. Book Martin to speak at your industry event.

Better Software-as-a-Service technology equals happier customers.

5 Ways Software-as-a-Service Can Enhance Customer Service

If you are a small to medium-sized CRE PM business owner, no one knows your customers as you do. So, it should come as no surprise that technology is disrupting traditional customer service models – in a big way. Cloud-based Software-as-a-Service (SaaS) is making its biggest splash ever. But going digital does not mean getting less personal.

Digital technology is drastically altering the power balance between customers and companies. According to Forbes, digital transformation with a focus on customer experience can generate a 20-30% increase in customer satisfaction and economic gains of 20-50%. Sounds like a win-win, right? Digital technology allows customers to gain the power of information and choice while increasing business revenue.

Property managers have even more of an incentive to make the digital leap. Digital workflows can reduce overhead costs, speed up leasing processes and increase response time – just to name a few advantages.

So, how do you offer quality personal customer service in the digital age? Let’s explore 5 ways property management Software-as-a-Service can enhance customer experience.

1. Access data anytime, anywhere

Even if you’re the sole property owner of one building, it’s likely you still have a stockpile of data. Think about all the information you’re given on an annual basis. Leases, legal contracts, utility bills and receipts must be readily available on hand. Companies of all sizes can reap the benefits of asset management software.

Property management systems offer unparalleled access to accurate, up-to-date, real-time data about your buildings. Common in old-style business workflows, personal data sets are typically on individual computers manipulated by a single person with their complex spreadsheets. This produces single-source, unverifiable data that easily propagates errors throughout the entire company. Eliminate the round trip of individual departments producing piecemeal paperwork in scheduled increments. Expedite the customer experience with centralized systems that provide immediate access to all data sets simultaneously.

In times of uncertainty, the speed of access to data is vital to decision-makers and stakeholders.  Landlords using property management software can respond faster to changing conditions and benefit from automated tools and reporting features. CRESSblue is an example of a specialized Software-as-a-Service system that offers tenant and owner portals. The tenant portal allows tenants to easily access invoices and statements through an online system. The owner portal functions similarly, enabling property managers to access invoices and statements and see property management reports.

Ability to access data anywhere at anytime

Furthermore, forward-thinking owners get the insights stakeholders need with access to comprehensive reports and ROI analytics. By applying business intelligence technology to these sources of data, you can mine them for patterns you never knew existed.

2. Take human error out of the equation

Looking to build a loyal customer base? Transparent and accurate reporting is non-negotiable. Who would want to do business with a landlord that fudges numbers on spreadsheets? Smart tenants demand more transparency from landlords on CAM cost allocations and calculations.

Manually tracking expenses leaves too much room for error. When it comes to managing other people’s money, you can’t afford to make mistakes. If you’re a landlord that runs multi-tenant properties, then you know all too well how difficult it can be to track financial information. Add custom lease terms, tenant inclusions/exclusions and cost recoveries to the mix – and the paperwork can pile up fast.  Here is an example of some of the lease errors that we’ve come across in paper-based systems:

Paper leases leave room for error.
The lease Basic Terms Sheet shows 1,050 included square feet.
There is more room for human error on paper.
But later in the lease, in Section 2, two other numbers are provided for the included square feet.

Landlords using accounting software have the clear advantage. Automation reduces the risk of human error, so you don’t have to dig through files to identify (and correct) mistakes. Digital workflows give you the option of automatically logging financial data, which takes all the guesswork out of the task.

Commercial leases are complex. Commercial property accounting software offers ease-of-use when managing cost allocations, requiring less customer involvement and accurate results. Unique tenant circumstances can be reconciled efficiently and painlessly. Deliver information confidently and professionally, with internal audit capabilities to assure tenants that their finances are in safe hands.

3. Self-service optimization

At one time, ‘self-serve’ was a dirty word. But in an age where technology offers instant access to information, self-service is an integral part of customer experience. Streamlined, user-friendly portals empower customers to get the answers they need without enduring long wait times and dreadful hold music.

What’s more, services like online payment and maintenance request submission can cut out the middleman. Landlords can promptly respond to tenant concerns. Cloud-based software, like CRESSblue, offers tenant portals with messaging systems that can alert landlords to a problem immediately. Owners can respond to tenants, message team members, schedule work orders and track maintenance tickets to ensure timely service is delivered.

Companies that embrace technology allow for greater communication amongst the team. Effective internal communication boosts morale, employee engagement and information sharing. Coupled with these benefits, integrated workflows that centralize and standardize your data also reduce customer follow-ups for additional information. In turn, this results in fewer direct calls, fewer tickets and happier customers.

The best part of all? It’s cost-effective. Keeping investors, landlords and tenants happy improves retention, minimizes vacancy and maximizes revenue.  

4. Customers want to make green choices

Consumer research shows that customers find it important for businesses to demonstrate social responsibility and take stances on current social movements. According to Business Insider, a recent survey found that 47% of internet users worldwide had ditched products and services from a brand that violated their personal values. Protecting the environment tops the list.

Not only does going paperless help the environment, but it also significantly reduces operating costs. You can cut out the expense of printing, storage and the transportation of paper itself. No checks to print, stamps to lick or envelopes to stuff. Swap the unnecessary administration time – in favour of secure, digital files that are easy to search. Still not convinced? As a tenant, would you prefer a firm that constantly delivers notices through your mailbox or one that simply sends emails straight to your phone?

Most important, digital information storage greatly reduces the risk of paper documents ending up in the wrong hands. Enterprise-level Software-as-a-Service systems like CRESSblue, lock sensitive information down and control access to files with user credentials. Real-time monitoring of the system health and intrusion detection ensure that records are securely backed-up and intact. Unlike paper, which can be destroyed, lost and never returned.

Lock down sensitive information and go paperless

As businesses plan for the post-coronavirus future, more owners are converting physical offices into remote property management teams. Remote working is an opportunity for companies to work more sustainably and increase productivity. Think less office space, less commuting, fewer business trips, shorter breaks and greater focus for employees.

5. Increased productivity equals more time for better service

Companies that leverage data-driven decision-making are far more productive than companies that rely on low-tech solutions. By investing in technology, owners are free to look beyond day-to-day operations and focus instead on property management leadership.

Automating complex processes and repetitive tasks saves valuable personnel hours. Adopting cloud-based Software-as-a-Service technologies increases business intelligence while decreasing administration time. These tools will enable you to effectively and productively improve internal processes and deliver professional service.

Phone calls, faxes and paperwork will only slow you down. And that will ultimately hinder your stakeholders. With smart business systems, you can automate e-notifications and reminder emails, as well as digital reports and documents.

The benefits of the cloud go beyond increased productivity. Digital and analytic tools can reduce the cost of operations while fostering flexibility. Smart business systems do the heavy lifting, so you can focus on strategies to boost your service level and ROI. Take pride in knowing your business is using tools to accelerate and scale. 

Start with your customers

The rules of business are being rewritten nearly every day with this imperative for digital transformation. There’s no denying that customer service is changing too. The current global climate has forced companies to rethink how customer interactions are handled, performed and tracked.

Emerging Software-as-a-Service technologies present an incredible opportunity to make customer service more natural, authentic and emotionally intelligent. Not surprisingly, customers value total convenience. What systems can you leverage to meet their evolving needs?

Commercial property management software rewards customers with easier, more efficient and ultimately, more responsive service. It’s your job as a business leader to apply tools to engage, connect and grow relationships. You owe it to your customers.

Investing in technology allows you to focus on customer service leadership

Embrace Software-as-a-Service

“Digital transformation” was a buzz phrase before the coronavirus crisis. Since then, it has become a necessity. Leaders must continuously reinvent their customer service model – with technology at its core. Otherwise, watch from the sidelines as tech-savvy customers are swept up by high-tech competitors using innovative Software-as-a-Service solutions.

Customers have already become accustomed to the digital experience. The demand is growing strong. They expect new standards of excellence, performance and just about everything in between. Failure to adapt will risk a loss of efficiency and frustration among your stakeholders.

Digital transformation is modernizing how companies work and compete in an evolving digital economy. What’s also evident is that executives are, by and large, prioritizing technology in their business goals. Not investing in remote systems will have far-reaching consequences on the way you work when the pandemic dust settles. Are you ready for a fresh customer service strategy?

Book a demo to learn how CRESSblue cloud-based property management software can help increase your profitability while cutting costs and positioning your business as an industry leader.


This article is for informational purposes only and is not intended as professional advice; please consult a competent professional for advice specific to you. This blog is written to stimulate thinking on concepts related to commercial leasing. Please join the discussion with your experiences.

Martin Sommer, CEO, CRESS Inc.

Follow me on LinkedIn

Martin is a founder and the CEO of CRESS Inc., a Canadian SaaS company that automates lease administration and asset management. Martin also manages Karanda Properties Limited industrial portfolio as Director of Operations in all areas of commercial property management, including new development, asset management, capital expenditures, operations, leasing and lease administration of the industrial portfolio. Martin writes about property management workflow and issues. Book Martin to speak at your industry event.

Changing workplaces - post-pandemic workspaces.

Changing Workplaces – Thoughts on Post-Pandemic Workspaces

We share a few thoughts on workplaces becoming non-tactile and managing environments in the post-pandemic period, and invite you to comment and share your insights.

Assessing the scope

There are two main areas of concern in workplaces: tactile surfaces and managing the air in the work environment. Both are directly related to containing the spread of viral infections through engineering controls. Behaviour modifications will be primarily outside of the scope of this article except concerning how they can be manipulated by means of building and environmental design changes.

There are broad implications when addressing these two areas. We will only touch on some of them superficially. Our goal here isn’t to provide answers. Instead, we first seek to provoke thoughtful consideration and secondly a reasoned discussion of possibilities.

Employee density

As employers are permitted to allow workers to return to office, retail and other commercial workplaces, the issue of maintaining physical distancing must be addressed. Some will not return for a myriad of reasons, including elevated risk factors for themselves or dependents, personal anxiety, loss of employment or the ability to work from home with ease and efficiency. These factors will serve to reduce employee density.

However, this does not automatically make workplaces suitable for returning employees to maintain physical distancing. Many shared workspaces were designed to maximize density, and these spaces will still be unsuitable for returning employees. It is estimated those office environments will lose 50% of their previous capacity. Workstations that are less than two metres apart, or those that face each other may only allow for every other workstation to be occupied diagonally to those across from them.

Reducing workplace density.

High-density workplaces also increase the demand placed on cleaning crews. Daily cleaning of elevators may still leave hundreds of people exposed to contaminated surfaces. The same for cafeterias and washrooms, meeting rooms and doors. Elevators, designed to hold many people in close proximity, will now have reduced capacity to one or two persons.

The increased use of aerosol disinfectants will inevitably give rise to respiratory irritation with increased exposure to harsh chemicals. Reducing the risk of contact contamination will have other side effects on human health.


Social distancing and work from home (WFH) have reduced public transit ridership to a mere fraction of its former use. It is difficult to see how social distancing and surface disinfection can be maintained on busses and trains. There are so many surfaces and hand-holds that are required for safety while standing or moving on these vehicles.

Will the risks of infection on public transit drive people back to personal vehicles? What impacts will this have on traffic congestion and parking in our cities? Will we see increased environmental impacts if more people choose to return to work using cars?

City planning

City designs may change to having wider sidewalks and pedestrian pathways to facilitate separation between people. This, of course, is much easier to write into building codes and city planning policies than it is to retrofit in existing infrastructure. There may not be enough space to accommodate both roads and wider walkways. One proposal is to reduce roadways in favour of broader pedestrian pathways while at the same time changing zoning regulations to permit a much greater range of mixed uses. The idea is to create mini-communities of residential, retail and office, and supply all within walking distance.

The concept of small communities where all necessary amenities are within walking distance is not at all new. In fact, before the invention of the personal automobile, that was the norm for all communities. It will be interesting to see a return to the old ways of city community design combined with online shopping providing worldwide access to goods. This concept could provide many benefits, including shopping local, reduced commuting and related environmental effects, a physically healthier population and a greater sense of community. All the while, helping reduce the spread of infectious diseases.

Reducing tactile surfaces

Workplaces contain an amazing number of tactile surfaces: light switches, keyboards, coffee and vending machines and serving utensils. Nearly every piece of office equipment has a button keypad. Handles are on everything: washrooms, closets, cupboards, entrances, drawers and cabinets. Humans use their hands for everything!

Sensor technology has enabled us to reduce the number of tactile surfaces we need to touch. Occupancy sensors have replaced light switches while simultaneously reducing energy consumption, and motion sensors have replaced faucet handles in washrooms. Fobs can replace keys and keypads for access systems. New technology is demonstrating that contactless holographic projections can be used instead of metal elevator buttons. While these systems can be expensive, the engineering difficulty is quite low for the implementation.

New contactless technology.

We will likely see a redesign of office equipment used by more than one person that further reduces the need for contact. Buttons on multifunction office printers/scanners/copiers may be removed and replaced by touchless technology or alternative processes. This may finally drive paper use down to near zero in offices, something that was predicted long ago that hasn’t happened yet.

Building design

Building codes invariably get more complex and all-encompassing over time. Over the last decade, the primary driving forces of change have been the reduction of building energy usage and internal environment conditions. Expect to see numerous changes to building design requirements and allowable capacities as a result of the knowledge gained during this pandemic.

Designing buildings for less touching and wider separation is possible. Many large facilities, such as stadiums and airports, have washrooms without doors by using winding entrances. For large buildings, the space penalty isn’t significant. However, the predominantly smaller workplaces simply do not have the space to rework the interior to meet those designs. It will be economically infeasible to reconfigure and rebuild many older compact layouts to meet the new standards. Add to that the reduced permissible occupant load and the market rents and value of older buildings will decline significantly. Low-valued buildings in good locations will lead to an increase in redevelopment. Combine these opportunities with changes in city planning bylaws and policies, and we could see significant progress towards the small community proposal outlined earlier.

Internal air quality will likely become a focal point. Already we see an increase in interest in HVAC disinfection systems through UV lights and better filtration media. With the increased use of aerosol disinfectants and airborne viruses, the number of air changes per hour will also be increased to improve the indoor air quality.

Internal traffic patterns

Traffic patterns within buildings have already been altered to prevent people from passing close or bunching up. This is accomplished through the use of arrows and spacing indicators in lines and waiting areas. Expect to see wider hallways or even unidirectional hallways and traffic patterns designed into new buildings. Mats with circles indicating personal space areas are already available and are showing up in office opening plans across Europe and North America. With separated workspace fixtures becoming firmly in favour, the purchase price of densifying office furniture is now steeply discounted. The pandemic regulations have reversed a decade long trend of workplace densification in mere months.

Reduced workspace densification.

What are your thoughts?

These are just some of the current thoughts on the changing workplaces in the near future. Doubtlessly politics, legislation, engineering, economics and human behaviour will play important parts in the developing story over the coming months and even years. While disruptive, the circumstances also provide the opportunity to innovate and improve. Let’s choose to be positive and use the forces that have been unleashed to make the world, our world, a better place for all. We invite you to add to these topics. What things did we miss? Are there other solutions that can address multiple facets simultaneously? Share your insights and join the discussion.


This article is for informational purposes only and is not intended as professional advice; please consult a competent professional for advice specific to you. This blog is written to stimulate thinking on concepts related to commercial leasing. Please join the discussion with your experiences.

Martin Sommer, CEO, CRESS Inc.

Follow me on LinkedIn

Martin is a founder and the CEO of CRESS Inc., a Canadian SaaS company that automates lease administration and asset management. Martin also manages Karanda Properties Limited industrial portfolio as Director of Operations in all areas of commercial property management, including new development, asset management, capital expenditures, operations, leasing and lease administration of the industrial portfolio. Martin writes about property management workflow and issues. Book Martin to speak at your industry event.

Remote asset management during COVID.

This is why COVID Makes Remote Asset Management Essential

Virtual offices, rent deferrals, building closures. As coronavirus sweeps the globe, property managers face new daily challenges in a rapidly evolving economy and remote work requirements. Companies that haven’t already moved to remote asset management are experiencing significant disruption and inefficiency.

How long this “new normal” will last is anyone’s guess. In response to COVID-19, local and federal governments remain fluid in rolling out relief and stimulus programs for small-to-medium size businesses. The Government of Canada introduced the Canada Emergency Commercial Rent Assistance (CECRA), which will lower rent by 75 percent for small businesses. In addition, the Business Credit Availability Program (BCAP) supports financing for Canadian companies in all sectors and regions. Comparatively, through the CARES Act, the U.S. Federal Government will send a one-time stimulus check to many Americans and make low-interest loans available to small businesses.

One thing remains clear – the pandemic has changed how we do business. Companies must understand their limitations and then act on that knowledge wisely and aggressively if they are to survive. Is your company positioned to survive? Is it possible to actually come out stronger on the other side of this current crisis?

Work-from-home technology, and empathy, enable you to care for your properties, staff and tenants safely and effectively. Here’s a look into how now moving to remote asset management can future-proof your property management business.

Take a page from history

Pivoting a business model in times of crisis is not new. It has long been an integral part of business innovation. Historically, during recessions and downturns, companies survive and outperform competitors when they invest in new growth areas and improve efficiency.

While it may be true that industry experts had forecast some turbulence in the markets, none of us saw COVID-19 coming. Then again, market disruption – while uncomfortable and anxiety-producing – generally creates opportunity.

Already we have witnessed companies quickly pivot to support immediate needs. Gap, Nike, Zara, Brooks Brothers and smaller manufacturers are using their factories to make masks, gowns and scrubs. On a smaller scale, some businesses have introduced new services and technologies to expand market reach.

Property managers, too, must pivot in real-time to deal with a rapidly evolving crisis. Businesses must ramp up with current technology to compete efficiently and support work-from-home staff and stakeholders. Now is the time to think fiercely about every resource available. Ad hoc responses won’t be enough. Property managers must implement new remote asset management tools and lay the groundwork for their recoveries now. How you restructure your business model will be crucial in optimizing solutions to problems that seem impossible to solve.

Why risk-averse leadership is reckless in a pandemic

Pivots generally bring significant risks, but strong leadership recognizes that the potential benefits outweigh the risks. Strong leaders see that paralysis in the face of danger can result in the most devastation. Indeed, it requires a unique type of leader to take risks during an economic crisis. The coronavirus pandemic is plunging the global economy into its deepest slump since the Great Depression.

When the situation is uncertain, human instinct can cause leaders to avoid action until the threat becomes clearer. But according to The New York Times, this means failing the “coronavirus leadership test.” Passing the test requires leaders to act in an urgent, transparent and consistent manner. All the while understanding that mistakes are inevitable and course correction is the best path to survival.

But where to begin?

You’re probably wondering which fire to put out first. This is an unprecedented time for a commercial property owner. From rent deferrals, to being unable to complete service requests due to shutdowns, to implementing new technologies – property managers have a great deal of stress on their hands.

However, the lack of strategic action only exacerbates disorientation. To start, carve out time to reflect on mistakes and take a long view at where you want to be post-pandemic. How prepared was your business to work remotely? Are there systems that could have increased efficiencies and productivity? How will your stakeholders see your business when this crisis is over?

Digital property asset and lease management is no longer a luxury

The stakes for digital transformation are higher than ever before. Property managers are being forced to consider contactless systems. Virtual business systems have become the most logical choice and, more importantly, the safest choice.

Property owners already leveraging integrated systems are far better equipped to respond to the rapidly changing market. Unfortunately, those still living in the digital dark ages will be left behind. Let’s take a deeper look at how property management software can increase efficiency in times of crisis.

Remote asset management and document sharing

At this point, the pandemic lockdown has likely exposed the shortcomings of entry-level software – or even worse manual workflows. Handwritten invoices and property details in filing cabinets make document sharing difficult on a good day, let alone amidst a global war against infectious disease.

Landlords face the challenge of responding to uncertain owners, accountants, realtors and tenants quickly, safely and accurately. All the while, they are juggling the collapse of customer demand, significant regulatory changes, supply chain interruptions, unemployment and economic recession. Fragmented, inaccessible data management is just another critical problem to solve.

With revenue dropping and budgets getting tighter, fewer people must do the same work as before. The new reality is, working from home now must be more efficient than working in the office was previously.

Online business systems give you instant access and control over your data. Centralized data storage is critical for tracking and moving information while providing a holistic view of records and the transition of people and properties. It is the only way to efficiently access information at all levels and in all areas – without the worry of passing paperwork by hand. CRESSblue significantly increases efficiency and supports remote working. It enables your company to be more productive than ever.

WFH must, and can, be more efficient than before

With CRESSblue, your team can seamlessly work from home or the office as needed. To illustration, one at-home worker can enter an invoice while another can review and approve it for payment – all without being in the same building. The right technology is now a lifeline for businesses.

Keep digital security concerns at bay

The pandemic has made it harder for companies to maintain security and business continuity. With work-from-home orders at an unprecedented scale, executives must prioritize initiatives to safeguard sensitive information.

Information sharing through excel and email only increase the risk of security leaks and human error. Cloud-based solutions can make it easier for staff to work remotely because they can be implemented faster than on-site systems. Also, software systems with configurable user restrictions will allow you to control both viewing and editing permissions. CRESSblue is a cloud-based software with role-based permissions for each user type. It enables you to distribute documents and be confident knowing your data is safely centralized and backed up.

Now is the time to automate complex calculations

Economists warn that it may take years to recover from the COVID-19 lockdown financially. Therefore, executives must maintain strict discipline in monitoring cash-flow with special attention given to capturing and collecting receivables.

There are emerging government exemptions and refunds available for companies aiding in the prevention and treatment of the epidemic. For example, in compliance with infectious disease control, multi-unit building owners may be required to invest in changing building security systems from a keypad to a touchless key fob system. If contributions to these types of leasehold improvements are rolled into the rents, the capital expenses should be clearly identified in new/renewed lease negotiations and in calculations to avoid paying income tax on money that isn’t really revenue. We covered more about leasehold improvements in a previous article.

Asset management software automatically captures recoveries

With the right asset management software capturing recoveries can be easy. Capital costs can be automatically classified and added to the building capitalization. Along with the appropriate depreciation values for annual tax returns and financial statements.

Let property management software do the math

While the coronavirus lockdown holds grip, landlords can expect to see more vacancies, tenant changes and rent exemptions. Multi-tenant property owners must prepare now for increased complexities when it comes time to calculate the proportionate share of CAM expenses.

Let’s consider a scenario in which a first-floor tenant in a multi-tenant office building institutes work-from-home orders, leaving their space vacant. In this hypothetical example, tenants on the second floor remain operational. Naturally, vacant spaces will have lower water and heating/cooling costs. Expenses are allocated to those tenants based on proportional areas, but now the usage varies widely for the period covered by the invoice. Work from home policies are creating vacancy-like conditions for calculating fair and accurate expense allocations. Imagine trying to track and reconcile intricate expenses and invoices on spreadsheets? Not a very efficient use of time.

Commercial software, such as CRESSblue, can automatically calculate the proportionate share for each tenant including occupancy/vacancy expense gross-ups and provide an audit trail for each invoice. This one-stop-solution will increase efficiency in your business and ensure nothing is overlooked. Perform complex calculations with automated actions that do the work for you – quickly and accurately.

Customers will remember how you react during the crisis

The best way for property managers to protect their revenue is to provide superior customer service, despite catastrophic circumstances. As we learned earlier, coronavirus leadership requires one to behave in an urgent, transparent and consistent fashion.

Consequently, it might be time to step-up your accounting game. Scrambling to gather invoices and lease agreements and amendments will only delay delivery, increase stress and leave room for error. An automated accounting system, like CRESSblue will increase reporting speed and accuracy for anxious stakeholders. What’s more, its internal audit capabilities can prove that accounting documents comply with the lease documents terms. In turn, the company can be confidently transparent in its dealings with tenants and prompt with auditors.

Plan for recovery now, not later

The COVID-19 crisis was impossible to exactly predict. But all crises contain the seeds of opportunity. The question is not if we can avoid uncertainty and crisis. That has already happened. Seeing that that disruption has already been forced upon us, what positive changes will we apply that driving force to?

Leaders must take action during a crisis with recovery in mind. Think broadly about where you see your property management business once the dust settles. More importantly, how do you want your investors and customers to see your business?

There is some speculation that this crisis may last for a year or more and may reoccur in the future. Post-pandemic, some people may need to continue to work from home at least part-time. How will you adapt if laws are passed requiring more space between work stations, but you don’t have more space available? What if key talent requests to continue to work from home 1 or 2 days per week? How will you ensure your company is capable of expanding and contracting as needed? Companies that are flexible and agile are the ones that can thrive during change.

Remote document management protects during this and future crises

Now more than ever, there is the need for innovative ideas and solutions to tackle unprecedented problems. It’s important to remember that technology-driven change and digital disruption are here to stay. When the crisis is over, it will be clear which companies have the resilience and agility to reshape their business model to thrive in the future.

Remote asset management is here to stay

You know it. We know it. The old way is no longer good enough in this new reality. Not quickly adapting is too risky and costly. Be the company that survived, no, thrived in the pandemic. When they ask in the future, tell them, yes, we survived AND grew. Your company and leadership will be more valuable than it was before the crisis.

CRESSblue can help you streamline your productivity and bounce-back stronger than ever before. Book a demo for a guided tour through the automated, time-saving features. It only makes sense to use a system that lets you do more with less when it matters the most.


This article is for informational purposes only and is not intended as professional advice; please consult a competent professional for advice specific to you. This blog is written to stimulate thinking on concepts related to commercial leasing. Please join the discussion with your experiences.

Martin Sommer, CEO, CRESS Inc.

Follow me on LinkedIn

Martin is a founder and the CEO of CRESS Inc., a Canadian SaaS company that automates lease administration and asset management. Martin also manages Karanda Properties Limited industrial portfolio as Director of Operations in all areas of commercial property management, including new development, asset management, capital expenditures, operations, leasing and lease administration of the industrial portfolio. Martin writes about property management workflow and issues. Book Martin to speak at your industry event.

Commercial net leasing 101 terms and definitions.

Commercial Leasing 101: Here are the Industry Terms You Should Know

Whether you’re a first-time investor or a veteran looking to brush up on your commercial leasing terms, we’ve got you covered. This article defines the various lease agreements and industry jargon to help you better understand what they mean to landlords and tenants – and the relationships between them. In the simplest terms, a lease agreement is a document that lays out the allocation of risk and responsibility for the use of property in exchange for money. Now, let’s dig into the terms and definitions.

Gross lease vs. net lease

There is no one-size-fits-all approach to commercial leasing. Lease agreements between landlords and tenants can take many different forms. To start, let’s define the difference between a gross lease and a net lease.

Gross lease

A gross lease is a lease in which the landlord pays all (or most) expenses associated with owning and operating the property. This ‘all-inclusive’ lease agreement is sometimes perceived as the most tenant-friendly lease type as the tenant can budget for a regular flat fee. However, the gross lease may be higher than necessary in order to protect the landlord from cost increases over time.

Most often used in office buildings, industrial and some retail properties, a gross lease eliminates tenant responsibility for the variable expenses associated to the property. Typically, gross leases are easier for small spaces, very short lease terms or unsophisticated tenants where convenience is paramount. However, there are instances when an overconsuming tenant may be on the hook for overage charges. For example, if a tenant exceeds electricity consumption beyond building standards, additional fees are often charged back to the tenant.

So, what is a net lease?

A commercial net lease, or N lease, is a lease agreement in which the tenant pays base rent plus additional expenses such as insurance premiums, maintenance costs and property taxes.

From a landlord’s perspective, the advantage of a net lease is that it offsets the variable costs of property ownership to the tenant. For example, if property taxes increase by 2% next year, it is the tenant’s responsibility to cover the additional rate in a net lease arrangement.

At the same time, net lease agreements can also be risky for the landlord if the tenant is responsible for making all the net lease payments. Let’s imagine the tenant fails to keep their property tax payments up to date; this may result in additional fees and fines that the landlord is responsible to pay. Even public utilities are often charged against the property title if the tenant defaults on the payments, resulting in an additional surprise for an unaware landlord. Therefore, most landlords prefer to file their own property taxes to ensure payments are made on time and in the correct amount.

Net lease tenants typically have the advantage of lower rental rates than that of a comparable gross lease. This is true even when factoring in the taxes and other operating expenses. Since the tenant is accepting a higher risk level, the compromise is that the commercial leasing landlord accepts a slightly lower income in exchange for consistency.

A gross lease versus a net lease.

Single, double and triple net leases

Let’s dive deeper into the different types of net leases. As a disclaimer, it’s important to note that net lease terms are often used interchangeably. Commercial leasing landlords and tenants will want to avoid making any assumptions based on how a lease is characterized. Lease documents should always be carefully reviewed to understand the obligations and the expenses for which each party is responsible.

Where net leases can differ is dependent on how the operating costs and expenses are allocated. This presents landlords and tenants with an array of choices for various scenarios (we’ll cover more about operating costs a little later in the article).

There are three basic types of net leases: single, double and triple net.

Single net lease

Single net lease properties are the least common of the bunch. In these leases, the tenant is responsible for paying base rent, plus all or a portion of the property taxes. In these leases, the tenant becomes responsible for the property taxes, whereas all other expenses such as operating costs, maintenance costs and insurance costs are managed by the landlord. Usually, tenants with a single net lease pay a lower base rent because of the added responsibility of property taxes.

Double net lease

Double net leases, also known as net-net or NN leases, is an agreement in which the tenant pays the property taxes and insurance premiums in addition to the base rent. All other expenses, such as maintenance and repairs, are paid directly by the property owner. Most commonly used in commercial real estate like shopping malls or expansive office complexes, landlords will charge double net lease expenses proportionally to the size of the leased space. A single or double net lease may also be called a semi-gross lease.

Triple net lease

A triple net lease removes the landlord from the equation entirely, as tenants pay most if not all property expenses. Much different than the ‘all-inclusive’ gross lease agreement, under a triple net lease the landlord is ‘hands-off’ as the tenant is responsible for all property taxes, insurance, maintenance and repairs in addition to the base rent.

Historically, triple net refers to leases where one tenant rents an entire commercial building and pays all property expenses for a longer-term (ten years or more). As leasing practices have evolved, the term triple net lease now also describes leases for a multi-tenant building where each tenant pays its proportionate share of expenses.

The types of commercial net leases.

Single-tenant and multi-tenant leases

By now, hopefully, we have demonstrated that commercial real estate can offer opportunities in a variety of arrangements. Whether an investor is looking to establish a single-tenant net lease property or a multi-tenant net lease property, both types of options have their pros and cons.

First, let’s enhance our understanding of single-tenant and multi-tenant net leases.

Single-tenant net lease

A single-tenant net lease is a rental agreement between the one sole occupant of a space and its owner or landlord.

Due to their simplicity, single-tenant net leases are often a good fit for first-time commercial leasing investors. With only one tenant to attend to, the property investor encounters less of a burden in comparison to managing the needs of multiple tenants. Imagine a scenario in which an investor has a single-tenant agreement with a triple net lease; the landlord could be alleviated of almost all property obligations.

Of course, investing in a single tenant property heavily relies on the quality of one sole tenant. The investor’s primary source of income significantly depends on the occupant’s financial contribution. If the tenant unexpectedly vacates, there could be detrimental financial and maintenance implications the longer the property remains unoccupied.

Multi-tenant net lease

Comparatively, in a multi-tenant net lease the odds of total vacancy are very low. A multi-tenant net lease is a lease between a landlord and a tenant where there are also other lease agreements within the same building complex, typically in a larger commercial retail property.

Investors might favour a multi-tenant property because they prefer to manage several units simultaneously instead of several individual projects. Contrarily, it may increase duties as multi-tenant buildings usually require more structural maintenance and repairs, and additional provisions to consider.

Retail lease agreement: common clauses

Retail lease agreements have various provisions to ensure both landlords and tenants are protected. The following terms are just the tip of the iceberg when analyzing the multiple permutations that can inform a retail lease agreement.

Retail anchor tenants

For many retail tenants, success is dependent on their neighbours. Anchor tenants is a term that refers to the key retailers that play a critical role in bringing crowds and human traffic to malls. Landlords are very likely to provide favourable rental rates and terms to anchor tenants, as they help sustain the business of smaller retailers.

In some leases, an anchor tenant agrees to a “continuous occupancy clause” which is a provision in a lease that requires the tenant to stay open during specified hours and operational throughout the period of tenancy.

Strength in numbers

Another negotiable lease agreement provision for retail tenants is the “go dark” clause. Under the go dark clause, tenants can stop operations in an unprofitable space while still paying rent for it. A tenant may choose to go dark for a few hours, days or weeks. They may wish to focus their resource on more profitable locations, or they may need time to overhaul the space decor.

Consequently, if anchor tenants or multiple anchor tenants leave the retail space, it is likely to result in a drawback of foot traffic and less business for the remaining tenants. Thus, the need for a co-tenancy clause. A co-tenancy clause is a retail lease provision which provides the tenant with protection in the form of reduced rent to compensate for traffic loss.

A provision that is advantageous for both property owners and tenants is known as “percentage rent.” Simply put, percentage rent is additional rent paid by the tenant based on a percentage of gross sales. The idea behind percentage rent is to give the owner the opportunity to negotiate the placement of a retailer in exchange for a percentage of their sales. If a tenant is experiencing periods of slower sales, the rent adjusts lower to accommodate the lower cash flow the tenant is experiencing. It provides a method to make the rent representative of the value the space has to the tenant over a wide range of profitability experiences.

Percentage rent, operating costs, capital costs and CAM fees

Now that we have a baseline understanding of the various lease agreements and clauses, we’ll conclude by exploring different lease expenses and how they are calculated.

How is percentage rent calculated?

With a percentage rent lease, a tenant must first pay a minimum rent. Once gross sales surpass a specified mark known as a ‘breakpoint’ the tenant is required to pay the owner a certain percent of every additional dollar in sales as additional rent. The percentage rent is often estimated and reconciled on a monthly or annual basis and may be averaged over a period of time. In some cases, the percent is industry standard and isn’t subject to much negotiation.

How percentage rent is calculated.

Natural vs. artificial breakpoint

The breakpoint is an important negotiated method, as there can either be a natural or artificial breakpoint.

A natural breakpoint is calculated by dividing the base rent by an agreed percentage.

Whereas, an artificial breakpoint may be determined by the bargaining power of the parties or specifics of the transaction. For example, a landlord may negotiate a breakpoint below the natural breakpoint, while a tenant with more clout may be able to negotiate a higher breakpoint.

Operating costs

Operating costs are common expenses that are paid frequently as they are necessary to operate and maintain a property. As noted throughout the article, operating expenses are often tacked onto a lease agreement in various forms. Some examples of operating expenses include property taxes, property insurance, maintenance expenses, utilities and administrative expenses. Operating costs do not include capital expenditures, debt or amortized cost recovery.

Capital costs

Unlike operating costs that are frequent and relatively low-cost, capital costs in a commercial lease are intermittent, expensive upgrades to the property that provide long term value. Some examples of capital costs include the installation of a new security system, a new parking lot or HVAC repairs.

These expenses are paid by the landlord and then amortized over a period of years. Some leases allow these costs to be recovered under specific conditions and over a period that is specified in the lease agreement. Typically, the amortized amount is charged monthly along with the rent and additional rent on an invoice for a specified period after the first replacement has occurred.

Common area maintenance

Common area maintenance charges, also known as CAM expenses, are the fees paid for the upkeep of areas designated for use and benefit of all tenants in a shared space. CAM expenses are common in multi-tenant lease agreements such as shopping centers and can include charges for parking lot maintenance, snow removal, utilities and more.

There are two basic calculations for CAM fees: variable CAM fees, where the amount charged to the tenant can vary based on expenses that may fluctuate monthly, and flat CAM fees, where the fees are a fixed amount.

CAM cap refers to the maximum amount for which the tenant pays its share of common area maintenance costs, and the owner pays for any CAM expenses that exceed that amount. For larger shopping centres, the anchor tenants may negotiate a flat CAM rate or CAM cap, and the remainder of the tenants will proportionally pay the balance of the CAM charges.

Optimal commercial leasing

The best way to understand the ins and outs of commercial leasing and manage optimal lease terms is to work with a team of experienced professionals, including realtors, lawyers, accountants and tech partners. When it comes to calculating complex multi-tenant expenses, leveraging property management software like CRESSblue can help commercial leasing landlords automate cost-recovery calculations for more accurate and professional results. CRESSblue is designed and backed by experienced commercial real estate professionals. This specialized net lease software efficiently handles custom leases for various unique circumstances – from multi-tenant to single-tenant, or any combination in between.


This article is for informational purposes only and is not intended as professional advice; please consult a competent professional for advice specific to you. This blog is written to stimulate thinking on concepts related to commercial leasing. Please join the discussion with your experiences.

Martin Sommer, CEO, CRESS Inc.

Follow me on LinkedIn

Martin is a founder and the CEO of CRESS Inc., a Canadian SaaS company that automates lease administration and asset management. Martin also manages Karanda Properties Limited industrial portfolio as Director of Operations in all areas of commercial property management, including new development, asset management, capital expenditures, operations, leasing and lease administration of the industrial portfolio. Martin writes about property management workflow and issues. Book Martin to speak at your industry event.

Formalizing processes for maximum wealth with asset management software.

Formalizing Business Processes with Asset Management Software for Maximum Wealth Creation

Small landlords with just a few buildings own most commercial property. Often, these landlords share a similar pathway to becoming landlords. Initially, they purchase real estate assets for their business operations. Over the years, they add a few more properties as their business and personal wealth increases. Their idea is to use real estate assets to diversify their investment portfolio, but their original business operations remain their primary interests. The property acquisitions are of secondary importance, valued as passive investments and loosely managed. They haven’t yet invested in asset management software.

And therein lies an important – and costly – gap. 

The fact is, there is a significant difference between real estate and other forms of investing. Financial investments such as stocks, funds and REITs have people that can manage all aspects of the investment independent of the owners. Real estate, on the other hand, is more like a business than a simple financial instrument. Commercial real estate is much more complex and requires active management by a variety of professionals, as well as dedicated asset management software and systems, to achieve full yields. It’s worth it, though, as correctly managed real estate can potentially provide higher returns than the other investment types.

What is an informal landlord?

Let’s get clear on what an “informal” landlord is. It’s not about size. The informal label refers to the management style. For example, a large company might lack formal procedures and comprehensive data management. Meanwhile, a smaller property management company might run with precise data control and efficient vertical integration. In this scenario, the larger company is actually the informal landlord.

Your team of industry professionals is vital

Every business uses industry professionals to meet the need for particular expertise and licensing. Small and even mid-sized companies rarely have all the required professional associations represented internally. Licensed professional agents and brokers assist with securing the best commercial real estate lease opportunities. Lawyers draft and review lease agreements that provide the best protections. Accountants prepare essential financial statements and file the annual corporate taxes. Property owners contract these external specialists when required and often view them as long-term, trusted business associates.

Professional engagement with external PM industry experts opens you to better opportunities.

But these industry professionals can’t replace you

These professionals are essential in the success of your property management business. But they can’t provide the kind of central leadership that maximizes your wealth creation. Only the business owner can meet the business responsibility to lead, ensure the use of proper asset management software and processes and bind all these various responsibilities together. If the real estate is being passively owned like an investment rather than a business, the generation of wealth will be limited.

How the informal management style limits your wealth creation

Let’s peek inside the operations of a hypothetical (but very common!) informal landlord. We see that the owner has internal staff that run the primary business. With the acquisition of properties, they inherit the added responsibility of administering the daily operations of the properties. None are specifically trained or experienced in commercial property management.

Sure, this has immediate cost savings in terms of paid labour. Unfortunately, it creates far greater losses in other areas, to the point of making the investment neutral or even a loss to own. Moreover, the informal landlord may have no idea how their properties are actually performing. How could they? A line or two in the business annual financial statements contain no relevant information on the state of the property management operations. 

Some losses incurred by the informal landlord include incorrect calculations, costly administration and audits, and lost recoveries.

So, what are these great losses that the informal landlord is suffering? Let’s now consider each of the key gaps that exist in informal real estate management. (We assume that our readers have some experience with owning commercial property. If you are new to commercial property ownership, you can read about the basics here.)

Let’s talk about CAM slippage

The primary factor in the annual performance of commercial real estate is the handling of the operational costs for the property. For the informal landlord, the problems with recovering costs occur long before the calculations start. The biggest issue is trying to make sure the invoices for the year are all included. Often significant recoverable expenses are simply overlooked. Even some as large as the property taxes – which typically comprise most of the additional rent amount – are missed. 

Dedicated asset management software, such as CRESSblue, prevents missed recoveries in two ways. One, the invoices are tagged to the property and tenant when they are entered for payment. That means nothing is overlooked. There is no hunting for the expense documents when it’s time to do the year-end annual reconciliation. There is no mad scramble when lenders or governing bodies request reports. Two, the software automatically performs the calculations. With this kind of professional system, there are no miscalculations or missing expenses that result in slippage.

Knowing who pays

Aside from missing invoices, there are a few other ways legitimate CAM expense recoveries go missing on the statements. Invoices often have poor work descriptions. They also can have mismatched addresses, where the tenant name doesn’t match the unit number. Nearly a year later, can the person doing the reconciliation remember what the invoices were for? What happens to invoices where you cannot figure out whose CAM statement they belong on? They get left out of the calculations to avoid embarrassing questions from the tenants. It feels safer to forget about them rather than respond to questions over poor paperwork. 

Knowing which expenses are recoverable

Another common problem in an informal system is the separation between the various parties involved in business operations. The property owner decides on the maintenance work to be done. The company bookkeeper, although skilled in the primary business activities, often has little or no experience in commercial property management. 

That person rarely has access to the leases or understands the legal language. Who interprets what expenses are permitted to be recovered based on the lease agreement terms? Small landlords rarely have skilled internal staff that commercial leases require to make this type of decision and effectively manage the business. 

Sure, successful property management comes with procedural and document complexity. But the right asset management software makes it much easier. Alternatively, ignoring the entire issue and neglecting proper data management because it just looks too complicated results in significantly reduced potential return on the investment.

Knowing how to split shared costs across multiple tenants

Even if the invoices clearly describe the work and where it was done, further complexity lies ahead. Proportional expense allocations for multi-tenant properties can be complicated, especially when there are renovations, vacancies, tenant changes and a variety of free rent exemptions during the budget period. We won’t get into the details of how to calculate the proportional cost allocations for multi-tenant properties here. We covered that in another article.

The right asset management software makes expense allocation easy 

Dedicated asset management software makes a huge difference here. Vendor accounts can be linked to specific property locations. This is especially useful for accounts that never change, such as utility accounts. It also provides significant time savings as well as eliminating the potential for allocation errors. The software can automatically calculate the proportional share of the expenses for each tenant based on the premise’s areas. 

Going one step further, CRESSblue software will screen the expense allocations for eligibility as defined in each lease setup. The combination of the linked vendor accounts, automated calculations and lease screening eliminates all losses previously incurred from those sources. These losses alone are often three to four times the annual costs for the software, making the financial decision an easy one. 

Keeping track of lease dates

Rental increases

Most commercial leases have provisions for rent increases during the term of the lease, either specified step-up amounts at various intervals or annual adjustments for inflation tied to a consumer price index. These rent increases are often applied late or missed entirely. Without a system to provide notifications about upcoming rent adjustments, the same rental invoice goes out each month without anyone checking the leases left in a filing cabinet. Good luck trying to collect all that missed rent when the lease term has expired, and someone finally notices the initial rent was never changed. 

Lease management

Aside from missed rent money, how about letting tenants and realtors know when the lease term is up? What about notifications about upcoming extension options? Proper commercial asset management software has all these features built-in, providing timely lease management notices to landlords and tenants alike.

Knowing where stuff is

Document management is another crucial feature of any professional business software solution. It is easy to add documents to a tenant’s records library, as most documents are exchanged digitally now. Combined with online software services, anyone who needs access to the documents can do it at any time. Property records are handled the same way, with drawings and tenant fit-up specifications available for the realtor listings and maintenance personnel. Online document storage means you no longer need to remember to look something up when you get to the office as you have access anytime and anywhere. You can also send copies to your lawyer, accountant; you get the picture. Documents are there, and they are available.

Letting people know

Of course, good commercial asset management software solutions provide multiple user roles. With CRESSblue, it isn’t one-size-fits-most. The access and editing rights of each role are customizable. A large company can establish access parameters for roles such as building managers, property managers, portfolio managers, regional managers, asset managers, capital expense managers, department managers and division VPs. A smaller company will have most of these positions vertically integrated into a handful of people and can assign accesses accordingly.

Remember those transaction records your accountant wanted to see? You don’t need to send them; they can log in and get what they need. Customization is standard, with specified roles and permissions giving advances in efficiency other methods can never achieve.


If only you had professional reports! Perhaps it would save some time on the telephone, trying to explain what you meant on that annual statement you had sent over to your tenants. What is on a “standard” statement anyway? What do other landlords have on theirs? These are common questions, and they indicate that you could use professionally laid out statements and standardized reporting.

Keeping lenders happy

While we are talking about reporting, what about the property rent rolls and operating statements your mortgager asks for every year? Commercial property management systems also instantly generate those. Property reports are also useful for getting insurance quotes. 

Say no to avoidable loss

None of the above is news to anyone who has worked in property management. At one time or another, most of us have experienced at least one of those slip-ups. Commercial property leasing involves large sums of money, and any mistake, whether accidental or deliberately taking losses, is costly.

The larger the informally-managed PM portfolio, the greater the total loss.

As odd as it seems, informal landlords normally accept recoverable expense losses every single year! Those losses are typically several times more than it would cost to implement a professional commercial software system. 

At some point in the decision to purchase commercial real estate, consideration was given to the investment potential of the property. How does an otherwise successful business person end up taking avoidable losses on their real estate investment year after year?

Understanding systems inertia

Small commercial landlords typically acquire their real estate portfolio scale later in life. Understandably, they do not want to invest significant time in learning an entirely new industry at the time they would be expecting to enjoy the rewards of their business growth and investment wealth strategies. 

The business systems of their primary business now serve secondary duty as real estate management systems. This is despite the fact that they are clearly inefficient and ineffective for that purpose. Perhaps the landlord doesn’t know the scale of loss. However, the recognition that it isn’t working well is no mystery to anyone.

Effective and efficient enterprise-level business systems able to automate critical business functions require quite extensive initial setup. Any business system looking to provide software services to smaller landlords must also include a significant amount of the initial setup as part of the package deal to ease clients through that transitional period. Look for a software company that is relational rather than transactional in the sales process. The days of boxed asset management software are long gone. Today’s software continually receives upgrades and updates. Your solution provider should be a business partner with an ongoing support relationship. 

Professionals want to work with other professionals

Compounding the above-mentioned risks is another significant gap for informal landlords not using professional commercial business systems. As we touched on, your commercial property management company relies on external industry professionals that offer unique expertise. The main three main types are realtors, lawyers and accountants. To be confident in the performance of their responsibilities, each needs specific types of information. Giving them what they need, how they need it, lets them spend their time more efficiently, opens you to better opportunities to which they have access and improves your credibility with them.

What real estate professionals want from landlords

Real estate professionals want their landlord clients to have information available and accessible. They need to know:

  • That the landlord has the lease agreements, is familiar with them and adheres to them
  • They are getting timely notifications of lease terms expiration, extensions options and new listings
  • The policies for the property, such as signage, security, waste handling and package deliveries 
  • The specifications on the premises, such as:
    • Supplied utilities like heating and cooling, electrical power and communications
    • Door sizes, numbers and types; and dock levellers
    • Zoning, permitted uses and prohibited uses
    • Exterior storage
    • Hours of operation
    • Drawings, space designs, space layouts and finish schedules

Having accurate and current information readily available makes the realtors work much easier. People like to work with other people that reduce stress and required effort. Be one of those people.

Realtors also look at potential landlords’ professional standards to see if they will impact the realtor-tenant relationship. This is especially important if the tenant is a national or multi-national client, and there is an opportunity for repeat business. Landlords that fail to meet professional standards for accuracy, timeliness and reporting create lost opportunity. The tenant account may go to a competitor if the tenant feels the realtor misrepresented its interests in a deal.

Missing out on high-value tenants means the landlord must take higher risk tenants. National and multi-national tenants have good covenants. They are low risk for defaults and pay their rent on time. Missing out on the opportunity to attract these kinds of tenants significantly increases the landlord’s overall default risk. For a landlord with a small portfolio, this can wipe out the returns on the real estate investments for an entire year.

What lawyers want to see

Lawyers like clients that, at the very least, know where their legal documents are. Do you know what is even better? Clients that operate within the scope of their agreements and meet their commitments. 

What is the area of highest tension between landlords and tenants? Operating costs. Defaults are rare. So are insurance claims. But everyone constantly deals with operating costs. No one enjoys conflicts over which expenses are legitimately charged back to the tenants.

This is where CRESSblue makes a notable difference. The terms of the operating expense recoveries in the lease agreement exist in a logical framework for processing expenses. The lease moves from being a static document in a filing cabinet to an active system automatically applying and adhering to the commitments made by the landlord. Any changes to the original lease setup automatically trigger a flag for review, so nothing slips by unnoticed.

If you want to avoid conflict over expense recoveries, put a system in place that automatically makes the best practices your default workflow.

What accountants need to know

Of course, all accountants want to see complete and accurate accounting. Rental income and expenses are the core of every financial statement, and CRESSblue links those to the tenant and property. External accountant professionals preparing financial statements under a review engagement commitment for a client will want to see the documentation for anything that creates a significant change to the balance sheet.

CRESSblue has a complete asset management capability with the ability to track assets and associated equipment. It also has fully customizable capital cost allowance functionality to track depreciation per federal and provincial or state regulations.

You create capital assets in the property database. In addition to calculating and tracking depreciation for tax purposes, you can link properties to individual leases. If the lease agreement permits capital cost recovery, the software can automatically add them to the expense recoveries similar to the operating expense recoveries.

Information access is greatly simplified for external accountants. As CRESSblue is an online application, accessing the data live from the server is simple. Depending on the level of service provided, access can be read-only or include full editing rights. Accounting review engagements requiring data verification and validation have never been so easy.

Formalizing property management for maximum wealth creation

Only you can effectively fill the responsibility to lead in the management of your property portfolio. Owning real estate investments is not as simple as holding a stock fund. If you view your real estate as a passive investment rather than a business, your potential wealth generation is lower than it could be. These case studies demonstrate how formalizing property management with better business systems results in significant gains.

Formal property management systems optimize wealth and professionalism.

Through your leadership, you can upgrade your operations with industry-specific software that delivers business systems and automation that encompass the full scope of commercial property management. This brings incredible efficiency to your business, in addition to control, accuracy and professionalism. Moreover, CRESSblue allows your internal team to manage your business with surprisingly little ongoing input from you. Professional operations and reporting are attainable by any landlord, big or small. Maximizing your wealth creation is within reach. You need only to decide to be professional.


This article is for informational purposes only and is not intended as professional advice; please consult a competent professional for advice specific to you. This blog is written to stimulate thinking on concepts related to commercial leasing. Please join the discussion with your experiences.

Martin Sommer, CEO, CRESS Inc.

Follow me on LinkedIn

Martin is a founder and the CEO of CRESS Inc., a Canadian SaaS company that automates lease administration and asset management. Martin also manages Karanda Properties Limited industrial portfolio as Director of Operations in all areas of commercial property management, including new development, asset management, capital expenditures, operations, leasing and lease administration of the industrial portfolio. Martin writes about property management workflow and issues. Book Martin to speak at your industry event.

When to make the leap to new commercial real estate investment software.

New Commercial Real Estate Investment Software – When to Make the Leap

What factors hold you back from making decisions on new business systems? Have you been holding back from upgrading to commercial real estate investment software? Let’s take a look at the common causes of inaction and how to address those fears.

The case for leaping forward with specialized commercial real estate investment software

Without a doubt, there has to be justification for transitioning to new business systems before arguing when to make the transition. To that end, we have previously made a case for new business systems. Not utilizing the right tools can strangle a business, severely reducing responsivity and profit. Interestingly, Forbes Technology Council lists 11 signs your software is due for a major update. Let’s dig specifically into the key reasons you should move forward with commercial real estate investment software designed for your business.

Centralized business data

Centralizing data collection allows for quality control.

Sources of data are everywhere now – in leases, abstracts, offers, contracts, agreements, invoices, term sheets, building operations and many others. The issue isn’t the quantity of data that can be collected. Instead, the issues with data collection and use are:

  • Data quality
  • Data integrity
  • Data aggregation
  • Data control
  • Data assimilation
  • Data dissemination

Data quality

Quality data can only exist with accurate and reliable collection. Further, the data must be relevant and suited for individual transactional use. Furthermore, the data must be qualitative and not just quantitative.

Data integrity

Data integrity involves encryption and user security controls in the software itself. What’s more, data validation can be done utilizing incremental change tracking for irrational or outsized changes (i.e. upon entering a 10% rent increase when the typical rent increase is 1% to 5%). Another method is to set data input limits for the expected values. On the human side, there are data governance policies to ensure that the data is collected and maintained accurately and consistently. More than that, though, the reliability of the data must be verifiable. This means that the source materials need to be readily available, typically in a digital format. It isn’t enough to have a spreadsheet of aggregated data. Unquestionably, the source documents must be accessible to verify the aggregated data.

Data aggregation

Data aggregation (collection and organization) from disparate sources must be done consistently through the use of systematic processes and repeatable workflows. Individually created spreadsheets are demonstrably the worst means of collecting and collating data due to the single user creation and the inability to display verifiable data sources. The consequences of segmented data can be devastating. For example, one property management company and its tenants discovered that it had erroneously overbilled for years:

Location 1
Original Square Footage171,422
Actual Square Footage157,568
Overpayment Over 53 Months$170,047.11
Location 2
Original Square Footage41,960
Actual Square Footage36,634
Overpayment Over 53 Months$120,239.84
Total Overpayments $290,286.95
Paper systems leave much room for human error and mismatched data, as demonstrated above. The consequences can be crushing to both reputation and cashflow.

In contrast, compare a spreadsheet of data to a database where every number links to a digital source document for verification purposes. In addition, each number that exists in isolation in a spreadsheet directly links in a database to the tenant, premises and accounting transaction history. Together, the aggregate data presents a total, accurate picture.

Data control

Setting controls on the data are critical for two key reasons. One, the data is now much more valuable in its curated form that it was in the various disconnected sources. Two, no one user should have singular control over the data. This is important both for maintaining the quality of the data and for preventing internal fraud.

Data assimilation

With the collected data now in a consistent, verifiable manner, a sophisticated Software-as-a-Service (SaaS) solution will assimilate it into the relevant areas of the business decision-making process. The data is collected once, curated and then made available for all. These unified data sets enable consistent business decisions. Siloed data systems with multiple duplicate data entry points, on the other hand, lead to inconsistencies in both the data and decisions based on them.

Data dissemination

The final step for the effective use of data is to disseminate it to the right people at the right time. Accessibility to the central data repository is key to making use of the data while it is current. The speed of access is vital to decision-makers and stakeholders, enabling them to respond faster to changing conditions or make changes to stagnant positions.

The centralization and control of quality data is likely the most significant immediate benefit you will realize when switching to a commercial business system.

Increased business knowledge through integration

Commercial real estate investment software made specifically for your business gives executives and managers access to a much more complete set of data. Centralized business systems provide access to all data sets simultaneously. They do not rely on individual departments making data available on scheduled intervals, such as monthly or quarterly reports. Not only do decision-makers have better data faster, but they also benefit from specialized insight and reporting tools. This makes for much quicker analysis and leads directly to more accurate and timely decisions.

Vastly improved efficiency

Business workflows and tools built into the systems benefit from standardization in all areas. This includes data entry and processing, allowing multiple users to enter data while the system processes that data independently of the user. Old-school spreadsheets hold individual user data inputs until they are blindly handed over to the next person. Additionally, paper-based systems leave room for messy documentation, like this illegible lease document:

Lack of legibility in this paper document created a billing nightmare for the companies involved.

SaaS-based, commercial real estate investment software, on the other hand, allows multiple users to enter clear data that is immediately available to all relevant users. Moreover, your team benefits from standardized data input forms and consistent reports.

Better investment returns

Obviously, another primary outcome of all the business process improvements is ultimately to increase ROI for the company. This objective is easily achievable in conjunction with improved work systems for all the staff when using enterprise-level, dedicated business solutions.

The impact of increasingly sophisticated tenants

Landlords aren’t the only ones with access to large amounts of data. Tenants are increasingly switching to more intelligent business systems. Larger tenants that have desirable lease covenants use sophisticated lease analysis software. What’s more, they demand more transparency from landlords on the CAM cost allocations and calculations. Landlords that do not meet the requirements of these tenants will find a shrinking pool of tenants willing to do business with them. Landlords using commercial real estate investment software have the clear advantage.

Existing systems and sunk costs

You’ve made it this far in the reading and understand the case for better systems. But you purchased software licences for other systems. Although you haven’t been able to meet all of the objectives you had hoped for initially, you haven’t fully amortized those costs. Perhaps you should wait until those costs are used up?

The costs for anything unrecoverable are known as sunk costs. It is a fallacy to allow those costs to influence new decisions. They cannot have any impact on the future because the spent funds will not change now or later. Draw a line under them and start fresh in your decision process. All that matters now and going forward is whether a new system will have a positive outcome on the business or not.

The fears (you’re not the only one who has them!)

How much will it cost? Purchase cost and ongoing licencing fees

The initial cost of enterprise-level systems is a shock to many just starting in the quest for better business workflow. Financial cost considerations often overshadow the financial benefits so much that fear petrifies the buyer, or they turn to software that costs almost nothing upfront.

Software system costs vary greatly. Why does some software hardly cost anything, and others charge so much? The difference is in the capability to save or even make money through efficiency and sophistication. The case for business software is financial on one side offset by the significant ROI that purpose-built industry solutions for commercial property management can achieve.

The cost of change - initial software cost versus annual cost savings due to efficiency gains.

How do you know what you can achieve? For one thing, book a demo of the commercial real estate investment software. Indeed, do more than one demo and focus on each group of users to see the workflows and interaction between departments and management levels. Have your decision team see and understand how the system works for your specific case.

How hard is it to set up? Implementation, training and deployment costs

The fear here is that setup will require a serious time commitment from the existing staff who still have to use legacy systems while doing the setup work. Where will the extra hours come from? Will there be overtime wages? When can we schedule all the extra work? How much resistance will there be?

Resistance to change

Change across an entire organization is always difficult. While helpful implementation strategies such as these are useful to get employees on board, CRESSblue recommends getting people involved even sooner. In this way, change is a response to their feedback directly and enables a more fluid process. Furthermore, the staff sees management implementing change to suit the needs of its staff, rather than forcing change.

Implementation of change

Implementation, training and deployment are typically lumped together as setup. There is a push to market software products that require little or no setup. However, to achieve exceptional levels of automation, the business system needs to understand your business structure and its data relationships.

Once you have created a shortlist of workable systems, what will it take to deploy the solution? SaaS software systems have significant advantages over legacy boxed software. The provider does the deployment. You are not required to supply any dedicated, onsite hardware. Typically, SaaS solutions completely bypass the old-style software installation process and provide instant, encrypted access using your Internet browser.

Look for after-sales training options. Is personal training available, or are you left to dig through a user-created knowledge base? Getting adequate training is important for several reasons. First, training reduces user frustration and gets early buy-in from the staff. Second, it allows for an earlier realization of newfound workflow efficiencies. Third, those who launch into sophisticated systems without training often pull together a workflow that works, but that doesn’t fully utilize the most efficient workflows available.

Look for a company as committed to your success using their product as they are in selling it to you. Insufficient or ineffective training can cripple the launch of a new software system through user frustration. Merely purchasing a sophisticated system in no way determines its effective deployment and use.

How long will it take? Slow realization of initial goals

What if the system we try doesn’t work out for us? What if it costs a small fortune, takes a lot of effort to set up and then doesn’t meet our expectations?

Take a serious look at using professional setup and training services. While doing all the setup internally can be beneficial for training and familiarity with the new system, manually inputting historical data can be very tedious. See if software scripts can be provided to import much of the historical data into the new system. Of course, this assumes you have enough good quality data available in a useful format.

In summary, online software avoids all of the deployment headaches of traditional boxed software products. Taking advantage of training advances the implementation curve significantly. Together, these factors lead to more effective use of the system and earlier realization of returns on the technology investment.

How long do I have to sign up for? Commitment liability

Commitment isn’t really the issue here. No one worries about commitment when they like where they are. Asking about commitment is actually looking for an escape mechanism in case you made a serious mistake.

The question then becomes “How long will it take to realize if I made a mistake?” The uncertainty is the highest at contract initialization and decreases inversely with software familiarity. Make a definitive commitment to fully implement and deploy the software. Subsequently, within a few months, you will know whether it will work out. Look for a 3-month money-back guarantee in your contract.

Will this work with my other software? Integration problems

This is more or less important based on two questions. One, how many other software packages do you use? Two, how much will the new system replace older systems? Other factors include reporting to or integrating with external systems used by others, such as financial reporting tools.

Newer software systems are typically built with an integration layer that enables rapid and relatively painless programming to connect systems. Ask what other systems have already been integrated and get quotes on the integrations you require.

Is change really necessary? Uncertainty

Facing uncertainty in business often feels worse than sticking with the processes you know. This inertia can be useful as a hedge against too rapid change and gives stability to the company. However, too much inertia and the company will stagnate and fall behind nimbler competitors.

Inefficient responses, improper reporting documents and poor accounting records are evidence of stagnation. Small landlords are not impervious to this measure. Being small and self-contained does not insulate you from the competitive influences of growing tenant expectations. Businesses must invest in themselves or get left behind.

What if I look like I don’t know what I’m doing? Image and reputation

This one is a personal issue. An outside expert is going to look at my business? What if I have been doing things wrong? Won’t that make me look inadequate or incompetent?

First of all, taking steps to improve is the smartest thing a person can do. Bravo! No one has ever grown by hiding in ignorance. Step up, learn and be surprised by how quickly you can make improvements with modern business systems working for you. Secondly, if you were far behind, you have the most to gain. Moreover, you will realize your efficiencies faster than most. Get the tools to make the improvements you need to outflank the competition.

If you have progressed this far in business and life, you undoubtedly have what it takes to master enterprise business systems. They exist for people like you, in your situation. Software solutions have advanced tremendously. CRESSblue is an example of a very specialized system that brings something brand new to the table. You aren’t unique in your need for better software solutions. Knowing what needs to be done and not doing it is a fool’s path. Seeing room for improvement and advancing toward growth is the behaviour of the savvy and successful. You have what it takes to be successful. A big part of that is a hunger for continuous improvement and competitive advantage.

Addressing the fears (the solution is right here!)

Briefly, here are the main steps that alleviate the concerns of moving forward with new commercial real estate investment software.

Get informed

Research and discovery diminish change-induced fear. Utilize the sales team resources for your benefit. Get more details, get more demos. It’s their job to educate you on the possibilities and capabilities of their solution, so inquire to your satisfaction.

Demo and test

One standard demo will demonstrate the general use of any system. However, unique situations and process exceptions can break the workflow for the user. After the first demo, ask the other future system users to weigh in with their feedback. Schedule additional demos to see the functionality and workflows and how they address the atypical situations.

Mitigate the impact of change

Since early adoption of the new system is critical to its successful implementation, use the provided training resources. Get everyone using it effectively as quickly as possible. Concurrently, have the system provider run data import scripts as soon as possible. This step in effect informs the system on your business data relationships.

Avoid new risks

Have the system provider make the necessary software integrations for you. Avoid using workaround solutions as they destroy the efficiency you hoped to achieve. Awkward workarounds also lower user confidence in the new system.

Utilize newfound efficiencies quickly

Rapid deployment means reaching efficiency milestones sooner, and that means greater profitability. Minimize the initial hump as much as possible, and then cross it as soon as possible. With this in mind, fully commit to making the commercial property management system fully operational within the first three months.

The cost of not leaping

If you are looking for better property management software, there is obviously room for systems improvement. Delaying or declining the move to the right commercial real estate investment software can cost your company in many ways. Here are the top five risks faced by a commercial property management firm using outdated systems:

1. Lost revenue

Slippage is a significant source of direct income loss. Improper CAM calculations and missing expense recoveries immediately impact the bottom line. In reality, remedying slippage can, by itself, cover the cost of the entire software system and associated setup costs in the first year alone.

2. Disorganization

Lost documents, disjointed leadership activities and inattentive business management are symptoms of ineffective business systems. Dedicated, purpose-built enterprise business systems allow you to “get your stuff together” and keep it that way. So, replace “What the heck am I doing?” with “Check this out!”

3. No progress

Business systems have changed significantly in even just the last few years. If you are still using spreadsheets and individual independent employees, untapped efficiency gains exist. Improvements in workflows are one of the main reasons for using professional software.

4. Operating on assumptions

It is a point often overlooked, but if you do not have aggregated business information readily available, critical decisions stand on loose foundations. Basing big decisions on isolated data points and assumptions of past performance based on memory is risky. Get a complete picture of each property’s performance covering all aspects from asset purchase to capital expenditures to operational revenues, recoveries and losses.

5. No integration with partners

As a small business, you likely don’t have inhouse professional services. So then, what connects your outside legal, accounting, insurance, leasing and contracted maintenance services? You do. You hand responsibility from one profession to another. Your broker gets an offer to lease, and you give it to your lawyer for a lease agreement. If you are a careful landlord, you get your insurance broker to review the new tenant’s risks. Your bookkeeper does the daily accounting, and you hand the books off to the accountant to file your annual returns. At the centre of it all is you. It’s your responsibility to integrate all the information from everyone into a business plan and to act. Why deprive yourself of business tools you need to organize, cooperate and understand?

Purposeful striding

Given these points, it’s clear that there is a strong case for moving forward with modern business software, and that there are logical steps to resolving the associated fears.

Now we get to the heart of the matter. Insomuch as something needs to be done, and done quickly, the best advice is: Don’t leap at all.

That’s right. Don’t rush into anything. Plan. Prepare. Execute. It isn’t a question of leaping off a cliff and hoping you make it. A smart executive strides purposefully toward intended goals.

Plan. Prepare. Execute. Commit to the best SaaS for your business.

The timing is now

Change inevitably happens in the business environment, regardless of personal stagnation. Consequently, this will either force personal change or force you out of the industry. The only thing worth feeling embarrassment over is awareness of what needs to be done while doing nothing about it. To let critical opportunities for continuous improvement and competitive advantage slip you by. You know what to do. You know how to start. More importantly, you know you can do this.


This article is for informational purposes only and is not intended as professional advice; please consult a competent professional for advice specific to you. This blog is written to stimulate thinking on concepts related to commercial leasing. Please join the discussion with your experiences.

Martin Sommer, CEO, CRESS Inc.

Follow me on LinkedIn

Martin is a founder and the CEO of CRESS Inc., a Canadian SaaS company that automates lease administration and asset management. Martin also manages Karanda Properties Limited industrial portfolio as Director of Operations in all areas of commercial property management, including new development, asset management, capital expenditures, operations, leasing and lease administration of the industrial portfolio. Martin writes about property management workflow and issues. Book Martin to speak at your industry event.

Old system and ad hoc workflow in online business systems. What is the competitive cost?

The Costs of Not Moving to Modern Online Business Systems

Online business systems in the financial sector

Modern online business systems for commercial property managers? There’s a common expression in commercial property management that real estate runs on spreadsheets. It’s true. There are four major categories in the financial investment sector:

  • Banks
  • Investment funds
  • Insurance companies
  • Real estate

Of the four, real estate lags the others in available software and systems adoption by up to 15 years. The others have invested heavily in current online business systems. As a result, they have reaped the rewards in the form of higher returns and faster response to market changes.

Let’s take a look at the ways this lack of digital sophistication has impacted the real estate management companies. Most importantly, let’s get clear on how smart executives can lead the way out of the digital dark ages.

The cost of time

The most readily observed, and perhaps resignedly accepted, is the length of time it takes to use patchwork software systems. To illustrate, imagine a business that allows the use of generalized software such as spreadsheets and word processors to be the core of its business systems. It’s easy to perceive that it uses its people to repeatedly design and maintain micro solutions to digital problems on an ad hoc basis. Obviously, this ad hoc process results in insanely inefficient use of time. Imagine trying to run a production line of cars where one person does the majority of the build on their own with hand tools and personally built fabrication jigs. Sure, a limited-run, high-end car might return value from a process like that. However, there isn’t a single real estate leader that would brag about hand-crafted, individually-constructed property reports based on the skill of individual property managers.

Workflow efficiency is a competitive advantage

There is an excellent opportunity to increase the efficiency in the preparation of reports, budgets, approvals and document travel through the use of software specific to the workflow of each sector of the real estate industry. Labour costs are one of the largest overhead costs in property management. Clearly, it’s time to move on to digital workflows that efficiently promote consistently better results while reducing individual effort.

Workflow efficiency is a competitive advantage.
DILBERT © Scott Adams. Used By permission of ANDREWS MCMEEL SYNDICATION. All rights reserved.

One of the topics that come up is that of employee job security. “If I switch to an integrated system, I’ll have to lay off half the people.” That is seemingly a valid sentiment. Who wants to be responsible for half the staff losing their jobs to software?

However, that thinking has a critical flaw, and it is this: inefficiency does not secure jobs. All that does is make the company worse than the competition, and the whole company will eventually go under or be taken over. No other company is going to hang around with you in the digital dark ages for the sake of your employees. The choice isn’t between all or some; the option is between some or none of them.

Online business systems empower your staff to do more

On the contrary, if you want to save jobs, it is done by being the most efficient firm in the industry. Therefore, switching to innovative online business systems is one way to achieve time efficiency. It results in higher margins overall. Plus, it generates higher revenue per person. That is the only way to secure employment long term, and it also creates more valuable employees. Secure jobs with better pay. Use that extra employee capacity to take more market share.

Data management and document control

The typical scenario with small and even mid-size property management firms is every-person-for-themselves when it comes to maintaining a set of documents for each property and each position. Data resides on the computer hard drives of the building manager, the property manager, the portfolio manager, the regional manager and so on. In fact, it’s unlikely that a complete set of data for each property even exists in this fragmented storage system. After all, no one person has the ability to see the entirety of it.

Seeing the entire picture

There tends to be a serious lack of consistency and transparency when it comes to fragmented and siloed data filing systems. It leads to reporting with very little supporting data included. Numbers in isolation lose their credibility and reliability as there is no way to verify their accuracy or the completeness of the calculations. Warren Buffett is famously known for his detailed and in-depth research on his planned stock purchases, right down to the notes in the margins in the raw data. How can someone effectively manage their investment responsibilities if they cannot get a complete picture of their own business?

Instant access to comprehensive information

Centralized data storage is critical for managing property data. It contributes to the effective movement of information, the completeness of the records and the transition of people and properties. It is the only way to effectively scale a company and still know – and know quickly – what is going on at all levels and in all areas. KPI’s are just that: key performance indicators. They don’t give details on why things are changing. Fast responses head off developing problems, and that requires readily available information right through to the lower levels. Periodic individual compilations of data aren’t enough. Relying on an annual financial report from an outside accountant to find out if the firm made money that year is ineffective for strategic business planning. It’s too late to correct the course for that year, and possibly for the next year also.

Centralized data enables deeper CRE insights consistency and transparency.

Specialized online business systems give you the ultimate control over your data.


Data security has several aspects to it. First and foremost, where are the files? Are they travelling around on personal phones and laptops? If so, the risk of total loss is relatively high due to device theft, failure of the storage media, accidental deletion, file corruption and malicious software attacks. Using office desktop computers can limit the device theft aspect. However, that’s not enough. Often, the other risk factors are not addressed in any significant way until a data loss or breach has already occurred, especially in smaller private companies.

Centralized data storage on a local network was commonplace a decade ago. In any event, times have indeed changed. Now it is considered an ineffective and costly way to address access, security and backup concerns. There is no guarantee that users are keeping files on the network as opposed to their local drives. Moreover, individual machines must be set to back up the contents of their drives to the servers. IT support is limited to external contracted services or internal staff. Purchased equipment asset lifecycles have more influence on upgrades than the changing security environment does, resulting in less than stellar data security.

The best business systems currently use online software hosted on large server farms. This economy of scale leads to five critical improvements.

The best property management systems use modern, secure technology.


The actual hardware is now in a competitive environment: Amazon, IBM and Microsoft all provide hosting services. The primary competitive edge is hardware performance vs. cost. Everything is best-of-class. Additionally, users can scale immediately based on need, not whether cash or financing is available to make computer equipment purchases.


The “big 3” all provide automatic backups and data storage redundancy.


There is real-time monitoring of the system health, intrusion detection and security by specialist professionals and enterprise-level software systems.


Hosted software systems automatically centralize all data storage by default. There is no need to control individual devices to make sure files are intact and backed up.


Access to files and sensitive information is also controlled centrally via the software system user credentials.

The right online business system reduces the non-stop burden on the internal IT department. Management of hardware performance, security and backups are professionally managed with best-of-class services and technology.


The agility to structure deals in new ways to meet a rapidly evolving real estate landscape is vital for business competitiveness. Markedly, it is an often overlooked aspect of what specialized, online business systems can offer. Previously we talked about landlord-tenant loans and how they can provide compelling advantages over traditional lease financing methods. The days of buying an accounting system and adding property management modules to it are fortunately heading into the long-awaited sunset. User experience and intuitive workflows are crucial now, making the software conform to the user rather than the user to the system.

Connectivity is the holy grail of data systems. Users can record and access relevant data from anywhere with their workflow. Plus, it is automatically accessible to others who also need it. Information becomes consistent and coherent, no longer dependent on a single individual’s performance and skill.

Opportunity costs drop to their lowest possible value with agile systems as such business systems consistently avail of the optimum response. Say goodbye to lost opportunities due to systems that cannot record the necessary information. No more missed gain waiting for software releases to catch up to what is already possible in real life. Best practices can become the default standard for a business that uses a software system optimized for their industry.

Monetary considerations

For commercial real estate management, the big one here is slippage. The inability of user-created spreadsheets to correctly handle complex cost recovery calculations isn’t the fault of the spreadsheet. It’s often simply too complicated and too time-consuming to create the correct formulas to do the math accurately. You can read more on the complexities of these and CAM calculations here. The resulting slippage is either accepted as an alternative to spending time doing the math, or as lost audit challenges from tenant lease analysts.

Other direct losses occur from insufficient management data to see developing trends and make timely decisions. There is an incorrect assumption that past data is sufficient for future performance predictions.

As an example, there was a period where the bitumen supply for roofing and asphalt paving was of low quality when prices for oil sands products rose sharply in the late 1980s. The effects were not immediately known. However, BUR (Built-Up Roofing) systems and parking lots started incurring significant maintenance issues and costs as early as 13 years into the expected 25+ year life cycle. Roof systems and parking lot replacements are the two most capital intensive prospects most properties ever face, and as a result, these costs were unexpectedly early. Aggregate information gathered from properties with this type and vintage of roofs and parking lots could have alerted property management firms of this issue. The managers could then strategically prepare to either dispose of those assets or plan for the capital expenditures.


One of the most significant benefits of adopting advanced business software systems is the substantial increase in professionalism. Due to the consistency and detail that is readily available in such systems, there is a marked increase in reporting speed, authority and accuracy. Internal audit capabilities can prove that accounting documents comply with the lease documents terms. Consequently, the company can be confidently transparent in its dealings with tenants.

The move to current online business systems

Staying in the digital dark ages will put real estate management companies out of business. Real estate is big business and forms a significant part of the financial investment portfolio. All of the other three sectors of banking, investment fund management and insurance have surged ahead with sophisticated software systems. Inevitably, the real estate management sector will also experience the same changes to software systems. In fact, there is much evidence that the change is already occurring. There is a rise in the number of available software systems for the residential, multi-tenant management companies. Commercial net lease real estate management systems have been much more challenging to develop. Fortunately, newer entries, such as CRESSblue, are now forcing change into the sector.


This article is for informational purposes only and is not intended as professional advice; please consult a competent professional for advice specific to you. This blog is written to stimulate thinking on concepts related to commercial leasing. Please join the discussion with your experiences.

Martin Sommer, CEO, CRESS Inc.

Follow me on LinkedIn

Martin is a founder and the CEO of CRESS Inc., a Canadian SaaS company that automates lease administration and asset management. Martin also manages Karanda Properties Limited industrial portfolio as Director of Operations in all areas of commercial property management, including new development, asset management, capital expenditures, operations, leasing and lease administration of the industrial portfolio. Martin writes about property management workflow and issues. Book Martin to speak at your industry event.

Landord-tenant loans - Risky and difficult or win-win?

Commercial Landlord-Tenant Loans: Yes or No?

Landlords and property management companies don’t often employ commercial landlord-tenant loans during lease negotiations. In our experience, there are five main reasons for this. Here we break them down and investigate their validity. Additionally, we show ways that commercial landlords benefit from providing tenant financing options.

Would you give a tenant financing?

Ask commercial landlords if they would consider giving a tenant a loan to pay for improvements to the leased premises. You are likely to hear one standard response:

“We don’t do loans.”

If you press them further on why they wouldn’t consider financing landlord-tenant loans when negotiating new lease agreements, additional reasons come up. Let’s examine the logic behind the most commonly expressed justifications.

5 common reasons why commercial landlords don't do loans.

Reason #1: We’re not a bank

This reason is brilliant! Banks take money from clients, pay those clients some interest, and lend it out to other clients for higher interest rates. The banks profit. On the other hand, landlords usually take money as rent and give portions of that money away on various leases as incentives or allowances. In this scenario, landlords do not profit on the dispersed money. Indeed, that is not bank-like behaviour.

Banks make money on everything they offer to clients. So, it isn’t a proud moment for a business owner to give this reason for not doing landlord-tenant loans. To clarify, why would you choose to give money away rather than loan it out at interest? It’s true, your real estate company isn’t a bank. However, there is a compelling case for making loans instead of giving away incentives or allowances.

Incentives versus tenant loans. One gives away money while one is money in pocket.

If cash flow is a concern, consider borrowing against the equity in the building. It is much more likely that a bank will lend a building owner money for property improvements than a tenant who needs business financing to scale up to a new facility. Concurrently, mortgage interest rates for loans secured against real estate are lower than unsecured loan rates. Therefore, it is easier for a landlord to secure financing, and at a lower rate, than it is for a tenant to obtain unsecured credit. This interest rate spread works to the landlord’s advantage. The landlord could not only borrow at a lower rate but also lend to the tenant for a 4-6% interest rate spread. The one-source deal for the property and funding is markedly in the landlord’s favour if the alternative is sending a tenant to their bank for a loan.

Reason #2: We don’t want the risk

Risk of what, exactly?

Without a doubt, loans have a risk factor for defaults. Although this may be true, giving money away is always a 100% loss. It’s a complete write-off every single time. There is no possibility of recovery, full stop.

To be sure, giving away money removes the ongoing risk of default. However, it is very doubtful that the incentive process was designed with this purpose in mind.

As a matter of fact, landlord-tenant loans are far less risky than any other method of getting money to a tenant. A tenant loan comes with a low risk of default. In contrast, an incentive or allowance comes with a complete loss.

Evidently then, the way to remove risk is to secure the loan through the lease agreement and not by explicitly accepting a complete loss from the outset.

Evaluating tenant risk

Every tenant gets evaluated on their creditworthiness when they submit a lease proposal. The financial score factors into two key lease components. Firstly, it impacts the terms and conditions of the lease. Secondly, it affects the qualifying incentive amount. Tenants that have a strong financial showing receive more favourable lease terms, lower rates, and larger incentives. Regardless of how credit or monetary rewards are extended, the same type of financial analysis is performed.

Evaluating tenant risk involves balancing financial score with lease terms and incentives.

Furthermore, a modified lease agreement is sufficient to secure the tenant loans. In a properly written contract, a tenant cannot walk away from the loan without also losing the premises. This provides additional security to the landlord.

Reason #3: Tenants want free things, not loans

Is there resistance to loans from the tenant side? Obviously, it doesn’t make sense to pursue the loan option if there aren’t tenants willing to take that route. But is this really the case?

Tenants want the premises optimized for their foreseeable business needs. That is the overall objective. Exactly how it is accomplished is another thing. Notwithstanding the fact any tenant would take free incentives over paying for them, it doesn’t preclude using other means to achieve their objectives.

What drives the requests for incentives and allowances?

The need for finances beyond what a tenant can carry at the time of the move drives the requests for incentives and allowances.

Firstly, moving disrupts a tenant’s income stream. Before the move, staff evaluates the amount of space needed and the type of facilities that could improve work processes. During the move, the team faces ongoing disruption from regular routines. Uncertainty slows whatever production is still able to go on. Moreover, the staff still working are doing so without the full strength of the workforce and leadership.

Secondly, equipment is often disconnected and reinstalled in the new premises. This equipment disruption additionally reduces output. All of this is happening at a time when the old facility was already inadequate for production requirements.

Only charities and non-profits work on the business model of getting things for free. Every other for-profit business operates with the assumption they will have to pay for the things they want. What most tenants need isn’t so much getting things for free as the ability to meet financial obligations during a time of reduced cash flow. For this reason, deferring payment for significant expenses during this period of unforeseen costs and low productivity is desirable. Providing financing for a tenant is an acceptable method of easing the transition to the landlord’s building.

Reason #4: We aren’t set up for making loans

Let’s break this down into two parts: internally working out how much to loan and what to finance, and dealing with the loan itself. We’ll investigate the business systems portion of how to deal with the loan in reason #5.

What to finance?

This isn’t really that difficult. As a landlord, you can start with whatever improvements that you might otherwise consider giving as incentives or allowances. As has been noted, loans provide a greater chance of getting your money back than incentives. Owing to that fact, you could consider other work the tenant would want but would be too costly to otherwise capitalize.

For example, perhaps the building really could merit the installation of two additional loading docks. The tenant may not have the cash to do the work now but could benefit from the increased productivity the docks could provide. The landlord may not be certain that the new doors would generate high enough rents in the future to cover the capital cost now if given as a free incentive. A landlord-tenant loan would enable both parties to achieve their objectives now. It’s a win-win situation.

Here is where another real benefit shows up. The tenant loan agreement has created a situation in which the landlord’s building has actually increased in desirability!

Offering a tenant loan creates leasing possibilities that wouldn’t exist otherwise in the world of free incentives and allowances.

How much to finance?

If a property management company is prepared to offer a tenant a loan, how much should it offer to finance? A risk limit was already determined during the review of the tenant’s offer to lease. The financial standing of the tenant and the proposed terms of the lease deal determine the amount of money normally allocated for lease allowances in cash or landlord’s work. Given that incentives would otherwise be given out with no expectation of a return, this amount is easily justified within the existing business decision process.

What about additional work that might otherwise be a capital expense? The landlord-tenant loan is unique in that the landlord has an amazing amount of extra control that a bank doesn’t have.

For one thing, the landlord has control over exactly what will be done. It has the right to examine the scope of work proposed, to approve how it will be done, and what materials will be used. The landlord can choose to finance work that is more generally suitable for the building and its functionality. It can opt for improvements that are likely to generate higher rental rates with subsequent leases.

As discussed in this lease improvements article, the landlord owns all the improvements made to the building. The asset’s value fully secures the loan. The fact that the landlord owns the leaseholds they financed mitigates the risk of loss. Regardless of whether the tenant defaults, the building still has the improvements.

Reason #5: Our business systems don’t support loans

Now that is a problem!

Most business decisions follow the path of least resistance to an acceptable solution. The result is generally a solution that does not deliver optimal results. If perfection takes too much time to work out and implement, then less-than-perfect suddenly becomes acceptable. Any time a business process adds too many steps to a workflow, the best solution will be abandoned for the most practical solution by those required to implement it.

As we have seen, the financial evaluation for landlord-tenant loans is the same process that is used to evaluate any tenant’s creditworthiness. The same types of improvements are available for consideration. However, the value of them can increase due to financing the improvements (rather than writing them off or capitalizing them). Clearly, the case for landlord-tenant loans is solid. On the other hand, considerable resistance exists via property management business systems that don’t support the ability to account for tenant loans.

Ideally, the system would show all aspects of the lease costs in one place:

  • The total cost of improvements
  • The landlord contributions via incentives or allowances
  • The tenant’s contributions
  • The tenant’s down payment on any excess over approved expenditures

Following those records, the business software should have the ability to:

  • Generate a loan amortization table for use as a lease schedule
  • Account for loan payments on the lease invoices
  • Record any extra or lump sum payments and adjust payment schedules
  • Keep track of the loan through any of the tenant, property, lease, and financial records simultaneously
  • Adjust automatically to the lease term dates in case of delays in the lease commencement

Does such an ideal business solution exist? It exists in CRESSblue. Register for your discovery demo today.

Making the case for landlord-tenant loans

Indeed, making loans available really helps smaller companies with limited cash get into a lease agreement. A loan creates possibilities that wouldn’t otherwise exist for both the landlord and the tenant.

Additionally, it can be an easy revenue source for landlords. The legal cost combines into the existing lease agreement setup. It’s a natural source of extra income derived from a property.

A tenant loan offer can significantly lower the amount of incentives a landlord would otherwise give away. Tenants ask for landlord incentives because they don’t have the cash flow or ability to finance the work themselves. Landlord-tenant loans can work out very well for both the landlord and the tenant.

It doesn’t create any extra work in evaluating the loan risk or scope of work. It’s all within the original capabilities and expertise of the persons already making those decisions.

As a property management company, you want your business software systems to support the best business practices. If your systems make the ideal outcomes the easiest outcomes, you will get better results as the default workflow. Limited software systems not only waste efficiency; they also waste opportunities. In contrast, ideal systems create opportunities to allow competitive advantages others cannot match.

Effective leadership is about seeing opportunities and enabling others to seize them. Add landlord-tenant loans to your toolbox and get the business systems in place to implement your new best practices. Make the path of least resistance the optimum outcome.


This article is for informational purposes only and is not intended as professional advice; please consult a competent professional for advice specific to you. This blog is written to stimulate thinking on concepts related to commercial leasing. Please join the discussion with your experiences.

Martin Sommer, CEO, CRESS Inc.

Follow me on LinkedIn

Martin is a founder and the CEO of CRESS Inc., a Canadian SaaS company that automates lease administration and asset management. Martin also manages Karanda Properties Limited industrial portfolio as Director of Operations in all areas of commercial property management, including new development, asset management, capital expenditures, operations, leasing and lease administration of the industrial portfolio. Martin writes about property management workflow and issues. Book Martin to speak at your industry event.

Choosing between entry-level and enterprise-level business systems.

Business Systems: Entry-Level or Enterprise-Level?

So, you’re looking to improve your business systems and discovered there are more commercial property management software options than you thought possible. How does a smart executive choose?

It’s essential to weigh price against capability, workflow and productivity gains. As a result, the most financially efficient system will become obvious. Let’s investigate this in detail.

The common offer

There’s a definite trend towards availability of entry-level software packages for property management. It seems every day another introduction flyer blows into the office announcing the latest and greatest new solution in real estate software. Almost universally, these are the key features:

  • Start using right away
  • No user fees
  • No long-term contracts
  • Low monthly fee

If it didn’t mention property management software, one might be inclined to think it was promoting a mobile phone plan. Does commercial property management software actually have the same evaluation criteria as a cell phone plan?

Let’s get going!

Who wants to wait for setup and training? We want to get productivity up right away!

How initial setup affects business systems

The initial setup allows for a significant reduction in workflows due to the automation of tasks that would otherwise be manual. For example, checking invoices against lease document terms can be automated on integrated systems. Similarly, cost allocations can be performed automatically, eliminating the need for time-consuming spreadsheets. Additionally, the reconciliation process can be automated, ending the need for manual reconciliations.

Setup doesn’t have to be difficult or complicated. However, the data needs to be input to allow the system to create the necessary logical structures between the property, lease and financial data sets. These connections allow software automation to take over tedious and time-consuming tasks. Without having the necessary structure in the software, it is impossible to realize significant automation. The system simply doesn’t have enough information to know how to process data for each specific case.

In many cases, large data sets can be set up in the system by using custom import scripts. This is possible when a reliable and accurate data source exists. The scripts map the supplied data into the correct fields in the new database. This setup can save significant time on tedious tasks.

Every advanced skillset requires training and practice. Athletes constantly train and use coaches to teach them and provide feedback. Being good at something requires dedicated education and learning.

Realistic expectations

Facts don’t support the expectation that employee productivity can increase without new systems training. If the system is so simplistic in its capabilities that training isn’t recommended, then there isn’t much hope for increased productivity ever. Alternatively, the system may be sophisticated but without training its users will be continually confused and inefficient in its use.

Training programs teach four important things. Firstly, training programs teach best practices. Secondly, they highlight new and faster workflows. Thirdly, they reveal crucial security procedures. Finally, training programs teach how to use the software most efficiently. This time allows your staff the opportunity to become familiar with the systems and to implement company policies. Providing software training indicates to employees that the company is committed to the system and their use of it.

Providing little or no user training is to accept mediocrity from the outset.

No user fees. Woohoo!

Wait, there are no user roles either?

Business applications need defined user roles. At the very least, the bookkeeping and payment authorization responsibilities need to be separated unless it is a sole proprietorship. Generally, a property management company will need, as a minimum, role segregation in leasing, financial (accounting), asset management (owners) and building maintenance.

Company hierarchy needs to be translated into the software systems and be evident in the user workflows. Approvals should be isolated to those given the authority to make those decisions by the company. The scope of work accessible to a role should be based on the natural flow of information in real life. It’s unlikely your accounts payable person knows that the work done by the maintenance person isn’t recoverable as additional rent for one tenant because of a lease exclusion. If your software isn’t sophisticated enough to do the allocations for you by checking the expense accounts against the lease terms, the lack of capabilities and defined user roles will severely impact the efficiency of your staff. It will drive the workflow outside of the software system.

User roles promote orderly and controllable business operations and decision making. You wouldn’t buy a car with the vehicle controls in the middle for everyone to use at will. Why would you consider critical business systems set up that way?

Defined user roles in business systems are critical for success. They come with scaling fees based on the complexity of the user functions attributed to them. You pay for what you use. We’ll look at fees in more detail below.

No long term contracts?

Ahh yes, the maximum flexibility.

Remember what was said about setup and training? A lack of commitment to a software system doesn’t allow for the realization of any efficiencies either. From the start, effective business systems require setup for automation. Additionally, employees need training to learn effective workflows.

Choosing a property management software system specialized for commercial applications is an important decision. Indeed, it isn’t something you want to do often. It should be a decision that is fully supported by the software supplier. A longer-term contract provides security for your business. Specifically, it assures that your initial investments will have time to pay off. Moreover, a longer-term contract indicates that the software company is committed to supporting and enhancing the system for at least the length of your contract. In contrast, a no-commitment contract lacks these assurances.

Business systems with low monthly fees

Surely those are good!

Fixating on the low fees encourages a “price only” evaluation. Frankly, that’s a ridiculous business proposal. If you want to determine value, you need to look at financial efficiency, not just financial cost. What are you getting for your money?

This isn’t the point where you ask for the features sheet.

What you need to see is how the software workflow and abilities improve employee productivity. Are leasehold improvements automatically capitalized to the correct properties? Are the annual depreciation amounts automatically calculated for the accountants? Can an annual additional rent reconciliation be automated without the use of spreadsheets? Is it ready for review in less than two minutes?

We’ve all seen a lease setup done in a demo. Have them show you how the system logic uses that to calculate the additional rent charges and exclusions based on lease periods and negotiated lease terms. Ask for role-specific examples to see the impact on workflows. How is a reconciliation affected by an area audit challenge in a multi-tenant building? Is it an accounting disaster, or merely two minutes of a supervisor’s time before you have new reports for all the tenants and managers? Go way beyond colourful screenshots and best-case scenarios.

The first software demo won’t be able to cover more than the general overview of the system. You will want to have additional demos on specific roles and workflows to assess capabilities and actual outcomes. To that end, you should get a deeper understanding of how you can vitalize your teams on the whole. In like manner, you should be able to visualize better ways to get work done. All in all, you need to see what you can actually accomplish. Don’t settle for anything less than the “that’s exactly right!” feeling.

Realizing efficiency in productivity gains

Can efficiencies be realized in increasing employee output? If you can give your employees additional workload, then the answer is yes. For example, with the right business systems, employees can manage additional properties within the same time frame. Overall, it is reasonable to expect entry-level software to increase employee efficiency by 2-5%. How will you utilize the newfound time and increased efficiency for productivity gains?

The goal isn’t to drive employees harder. Firstly, the goal includes significantly improving the bottom line while reducing tedious work and time required. Secondly, it is to get more accurate and complete accounting. Thirdly, it is to have a happier team. And fourthly, it is to operate a more professional company.

Software systems need to be evaluated based on the impact on actual user roles. Moreover, any found efficiencies need to translate into markedly and measurable increases in productivity. Only then can you make a value assessment linking price to productivity.

Checking the math

Let’s run a quick sample calculation.

In this illustration, we have assumed an average employee salary of $50,000 per year and 50 weeks working, giving a salary amount of $1,000 per week. The results are scalable to whatever pay rate you want to use.

Entry-level software

Entry-level commercial property management software is typically $1 per unit with a minimum of $200 per month. Assuming that this software gives a realized increase in productivity of 5%, we get the following:

Annual Cost  $2,400  $2,400
Monthly Cost  $200  $200
Weekly  $48  $48
Time Savings @5%  2.5 weeks  10 weeks
Savings  $2,500  $10,000
Savings Less Cost  $100  $7,600

We have assumed that there is no limit on the number of users allowed on the system at any one time and that fixed fees apply regardless of the number of users.

Enterprise-level software

Enterprise-level software can conservatively increase productivity by 15% in realized output gains. We have assumed an average combined cost per user of $2,400.

Annual Cost  $2,400  $9,600
Monthly Cost  $200  $800
Weekly  $48  $192
Time Savings @15% 7.5 weeks 30 weeks
Savings  $7,500  $30,000
Savings Less Cost  $5,100  $20,400


Enterprise-level software is the clear winner from a business standpoint. Even if you factor in personnel time for the first-year setup into an enterprise-level solution, you still come out ahead when the size of your company dictates you need to move beyond generic accounting software and spreadsheets. The long-term savings are too significant to ignore.

Given these points, it’s not that hard to decide. For example, if you are delivering products, do you want fancy running shoes or a delivery truck? Running shoes are easy, cheap and require little commitment. However, they offer little change in productivity. A truck requires commitment in time, money and operating costs. However, the boost in productivity puts you in another business class entirely.

Investing in a delivery truck serves to break through current limitations. The running shoes can’t come close. Likewise, enterprise-level software supports an optimal workflow and generates maximum productivity. Not surprisingly, marked business growth requires the implementation of correspondingly large business systems.

Decision time!

As can be seen, enterprise-level software systems unquestionably provide the most direct path to commercial success.

The investment in new business systems needs to result in measurable increases in productivity

To that end, here are several key thinking points when evaluating new software systems:

  • What are the current roles in my business structure?
  • Why are the roles defined in those ways?
  • Is the workflow based on the natural flow of information and decision authority, or are they based on the current system process limitations?
  • What are people spending their time on?
  • Where can we save the most time?
  • How much control do we have over the systems we use?
  • Does our work match the processes we use, or does the system define how we do our work?

What defines how we do our work?

Imagine the possibilities if:

  • Your business systems were smart enough to use logic to make repeatable decisions instead of people repeating decisions.
  • Computers did all your math instead of people making and using spreadsheets.
  • Your people did work that let them be thinking humans, and machine systems flawlessly performed the tedious and mundane.
  • Roles supported your people, their abilities, their authority and natural lines of communication – rather than system limitations.
  • Workflows were complete within the software solution.

CRESSblue is designed to require no more interaction for regular tasks than a person would need. So, if a person can describe a complex invoice allocation to another person in 90 seconds, the software can do the same. Or, quicker. As a matter of fact, CRESSblue will also do all the calculations based on internal logic and give you the results, without using employee time. What’s more, you will receive personal support in the initial setup, implementation and training to ensure your success.

We are ready to make a case for the financial efficiency of our commercial property management software system. Moreover, we are happy to demonstrate the clear difference CRESSblue can make for you.


This article is for informational purposes only and is not intended as professional advice; please consult a competent professional for advice specific to you. This blog is written to stimulate thinking on concepts related to commercial leasing. Please join the discussion with your experiences.

Martin Sommer, CEO, CRESS Inc.

Follow me on LinkedIn

Martin is a founder and the CEO of CRESS Inc., a Canadian SaaS company that automates lease administration and asset management. Martin also manages Karanda Properties Limited industrial portfolio as Director of Operations in all areas of commercial property management, including new development, asset management, capital expenditures, operations, leasing and lease administration of the industrial portfolio. Martin writes about property management workflow and issues. Book Martin to speak at your industry event.

Commercial leasehold improvements cost accounting.

How are Leasehold Improvements Accounted For?

What are leasehold improvements?

Leasehold improvements are construction that is done to the premises a tenant is leasing to make the space functional for them. Depending on who pays for the improvements and who owns them, there are a variety of legal ways in which the costs are accounted for. Commercial tenants will want to be sure they aren’t paying for them twice.

How do leasehold improvements work?

When a tenant looks at commercial property with the intent to lease the space, there are usually things that they will need to make the space more functional for them. This might include more private offices, additional meeting spaces, separated workspaces in the open warehouse or additional shipping doors. The tenant’s broker will typically insert these into the Offer to Lease under the Landlord’s Work section. Once the landlord gets the offer, they will move many items to the Tenant’s Work section, depending on the future value of the suggested leasehold improvements.

Here is where the first important distinction appears: ownership of the leaseholds isn’t necessarily determined by who pays for the work. Payment of the leasehold improvements is a negotiated deal, but ownership is usually determined by the terms of the lease agreement itself.

Who owns the leasehold improvements?

It might be logical to think that whoever pays for the improvements would own them, but this is usually not the case. Nearly every commercial net lease makes the leasehold improvements the property of the landlord immediately upon completion.

Furthermore, the lease will still require the tenant to maintain the improvements as if they still own them. They do not become the responsibility of the landlord in any way, which includes insurance. The tenant is required to insure the leasehold improvements and to use its insurance to rebuild those improvements if the building is damaged. A lease may even require a tenant to remove or restore parts of the leased premises after the lease term is over, depending on what was negotiated in the lease. It may seem unfair, but leases aren’t inherently fair. Above all, they are an agreement for allocating risk and responsibility in exchange for money and the use of real property.

The 3 ways in which leasehold improvements are paid for

There are three main methods for handling payment of leasehold improvements. None of the three methods is inherently wrong or better than the others.

The first way of handling payment is for the tenant who is leasing the premises to pay directly for all of the work that is done to improve the space. All they seek from the landlord in the lease is the approval of the landlord on their proposed work. The tenant hires the contractors, manage the process and pays for the work. In this case, the rent is based on the premises essentially “as is”, and no account is made for the tenant’s improvements in the base rent number (also called minimum rent).

The second way is for the landlord to provide a monetary incentive to induce the tenant to make a better lease offer, which could involve the tenant doing more Tenant’s Work or staying for a longer term. This inducement amount is either a fixed amount or is given as “X” dollars per square foot to be paid to the tenant to offset the cost of the improvements. Inducements are typically incorporated into the base rent and from that perspective are invisible to the tenant. This is like a cash-back offer, for the reason that the value of the cash back is incorporated into the price. Inducements allow the tenant additional funds when cashflow due to moving disruption can be an issue.

Leasehold improvements inducement amortization example.
An example of how landlord inducement amounts can be applied over time as illustrated using CRESSblue commercial property management software.

The third way is for the landlord to do the leasehold improvements by doing the work and paying for it. This can be tricky from a tenant’s perspective because the cost of the improvements may be bundled up into the base rent number.

Leasehold improvements are accounted for differently depending on who pays for them

If the tenant pays for the leasehold improvements directly, they are categorized as CCA Class 13 on a Canadian corporate tax return. These improvements are subjected to the half-year rule and are amortized using the straight-line method (meaning the same amount is expensed in each period) over the initial term of the lease.

If the landlord pays an inducement amount to a tenant to offset the costs of the tenant’s work, it is considered income to the tenant. The tenant may use the inducement amount to offset the capitalized costs directly to defer the tax impact. The landlord could treat the inducement amount as a current deduction if it is clearly for the purpose of obtaining that particular tenant, but more likely will amortize the expense over the initial term of the lease.

If the landlord incurs the cost for the leasehold improvements directly and if the costs are of a nature that isn’t specific to a particular tenant, the costs can be capitalized to the building. For tax purposes in Canada, they are then categorized as CCA Class 1, and a declining balance depreciation rate of 4% is used. The base rent is considered only rental income.

What are blended base rents?

If the costs of the improvements are bundled into the base rent and recovered that way without specific disclosure, several things occur.

First of all, the base rent is still treated as income, but part of it is actually a return of capital to the landlord. It would be more accurately described as a rent payment and a loan payment combined. It often seems less confusing to unsophisticated landlords and tenants as it presents only two payment numbers: one for rent and one for the additional rent (or even just one number if it’s the tenant is paying gross rent). The problem for the landlord is that it is paying income tax on money that isn’t really revenue. Concurrently, the problem for the tenant is that it isn’t only paying base rent. Trying to simplify the rent numbers means that the tax treatment isn’t being handled correctly.

Finally, municipal tax rates are set based on the income-earning potential of the property, not the construction cost or the accounting book value of the building. If the cost of the tenant improvements isn’t properly accounted for and ends up in the base rent number, it could cause the property tax values to be higher than they should be. That makes the additional rent higher for the tenant and makes it harder for the landlord to compete in the open leasing market.

How can a tenant end up paying for improvements twice?

If the end of an initial lease term is approaching and the tenant elects to exercise an extension option, the new base rent has to be set. The lease will have language in the lease extension schedule that describes the process for determining how the base rent will be agreed upon. Many leases will have wording to the effect that “… in no case shall the rent be less than the preceding 12 months rent…” On the surface, this may seem fair, since the landlord wants to reduce its risk exposure to rental income loss. However, two important issues are ignored in these words.

The first concerns market value. If the tenant paid for the leaseholds in any way during the initial term, will the new rate be based on the premises as they were before the tenant paid to improve them, or will it be based on what the improved space could get for the landlord now? What exactly is the fair market value based on? If the new rate is based on the market value of the improved space (remembering that the landlord owns the improvements regardless of who paid for them), the tenant will be paying rent to use the improvements it already paid for.

The second issue is that both the landlord and the tenant set themselves up for conflict in the future by making things unclear in the beginning. It can be difficult to know or remember that the rate proportions of base rent and improvement costs were blended initially years earlier. If the repayment portion wasn’t defined at the beginning, it cannot be separated from the rental rate later, and there is no clear way to know what amount it reasonably represented. When it comes time to do the extension, it will be difficult for the tenant to argue convincingly what the base rent floor should actually have been if the number includes other factors rolled into it. In the case of blended base rent and improvement costs, the catchall phrase may actually have the tenant paying for the improvements again in the extended term of the lease.

Even if the tenant isn’t looking to do an extended term, the problem of unclear improvement cost allocation and recovery can show up in an early lease termination. A landlord seeking damages from the tenant will look to recover unamortized leasehold improvement costs and the tenant will not have a clear idea of what it has already paid.

With all the potential issues, why would improvement costs or incentives be rolled up into the base rent?

In addition to simplicity, there is one strong motivating factor. Limiting information in leasing is usually in the landlord’s favour, particularly if the tenant has relatively small bargaining power. It isn’t that every landlord is out trying to take advantage of tenants; it’s simply easier if tenants don’t know what questions to ask and don’t ask any. Keep in mind that leases are contracts and as such the parties can agree to whatever terms they wish – they don’t necessarily have to be fair, just not illegal.

There’s another reason why landlords roll up incentive costs into the base rent, particularly if the incentives allow for a much higher base rent to be set. The building asset value (not the accounting book value) is based on the capitalization (CAP) rate. The CAP rate is the ratio of the net operating income (NOI) to the asset value. If the operating income is inflated by adding in the incentives that are being recovered through the use of an undisclosed blended base rent rate, the value of the building can be artificially inflated above the actual market value based on typical market rents that would otherwise be expected. Some allowance is usually made for undisclosed incentives in the base rent, but large swings from “normal” can influence unsuspecting buyers.

Often the unconscious driving factor behind decisions is the desire to take the path of least resistance to the earliest results. For tenants, it’s the desire to close the deal in an unfamiliar type of negotiation to get on with the move and refocus on their business growth in the new space. For landlords, it’s the desire to limit legal costs and time in negotiation and tenant education, close the deal and start collecting rent.

There isn’t one particular skilled profession that will tackle all the risks associated with the lease deal for the landlord other than the landlord itself. A good broker or lawyer will identify most legal risks on behalf of the tenant, but the future business risks are usually up to the respective parties. Experience is vital for all lease agreements, but especially for identifying risks in negotiation positions when the impact is extended over long periods of time. A specialist lease analyst will have a good working knowledge of a broad range of the professional fields (legal, insurance, financial, construction, leasing and a host of other site specifics). Consequently, they can assist in identifying and proposing solutions to potential lease issues.


Commercial lease tenants should insist on clarity in their rent rates. Leasehold improvements cost money and the costs will show up somewhere in the lease terms. Know what they are and where they are included. Have them specifically identified in the lease agreement, including any repayment terms.

Landlords should use systems and procedures to facilitate their record keeping. Therefore, they would use specialized commercial net lease software, such as CRESSblue, with a built-in workflow to do this efficiently and correctly.

Improvement costs and improvements loans, as displayed in commercial property management software.
Clearly recorded and summarized improvement costs and improvements loans, as displayed in CRESSblue software.

The landlord’s process should start with accurately recording the leasing incentives, such as leasehold improvement allowances and construction costs, directly with the lease documents, and tie these to the leased premises in the property records. This allows for documentation to be found in the building history, the lease records, and the tenant records. Invoices should be identified and automatically filed on entry into the records system.

Landlord contributions to the leasehold improvements should be clearly identified. These costs can be automatically classified and added to the building capitalization, with the appropriate depreciation values calculated in a table for the annual tax returns and financial statements.

Amounts to be recovered from the tenant should be treated as a loan to the tenant. Any lump sum payment from the tenant at the lease commencement should be recorded and deducted from the outstanding amount. The balance remaining will then be the loan principal.

Using CRESSblue property management software, the loan terms can be entered and the loan payment schedule will generate automatically. There is a provision to enter extra payments any time throughout the term and the schedule will auto-adjust to reflect these. Furthermore, payment schedules can be tied to the lease period dates to correctly adjust to lease commencement and termination dates.

Leasehold improvements loan schedule example.
Efficiently managing a leasehold improvements loan requires easy recording of loan terms and extra payments, and an automatically adjusting payment schedule, such as is offered in CRESSblue.

If the path of least resistance to the quickest results is driving business decisions, it makes sense to use a system that delivers the best results while doing just that. Hence, your software system can enable your team to do the right things with minimal effort. Resultantly, you will consistently have work that is accurate to the highest standard. Try the “Is CRESSblue Right for Me?” Questionnaire to get a better picture of how it can empower your business and team.


This article is for informational purposes only and is not intended as professional advice; please consult a competent professional for advice specific to you. This blog is written to stimulate thinking on concepts related to commercial leasing. Please join the discussion with your experiences.

Martin Sommer, CEO, CRESS Inc.

Follow me on LinkedIn

Martin is a founder and the CEO of CRESS Inc., a Canadian SaaS company that automates lease administration and asset management. Martin also manages Karanda Properties Limited industrial portfolio as Director of Operations in all areas of commercial property management, including new development, asset management, capital expenditures, operations, leasing and lease administration of the industrial portfolio. Martin writes about property management workflow and issues. Book Martin to speak at your industry event.

Commercial net leasing.

An Introduction to Commercial Net Leasing & Commercial Lease Software

Why should I be concerned with commercial lease software when it comes to commercial net leasing?

Commercial lease software processes the complexities of commercial net leasing most efficiently and accurately. In this introduction to commercial net leasing, consider the challenges faced by landlords and how property management software makes them easier to overcome.

What is commercial net leasing?

Commercial leases, also known as commercial net leases, are agreements to rent space for business purposes where the rent is net of the operating costs to own and manage the building. There are different types of commercial facilities, with the four broad classifications being office, retail, warehouse and industrial. Often, components of several types are combined in one space, such as industrial with some office and warehouse components. The leases are uniquely tailored to suit the main business use of the tenant in the premises.

Four broad classifications of commercial properties.
Common categories of commercial leasing include office, retail, warehouse and industrial.

What makes commercial net leasing different from renting?

Typically, those new to commercial net leasing are mainly familiar with the concept of residential renting, where tenants pay one monthly rate and are only responsible for separately metered utilities and damages to their rented space. Residential tenants also have an abundance of protections and legal rights.

Commercial lease agreements are nearly the opposite, and this is often a shock to someone who has not been exposed to a commercial net lease. Below are a few of the areas in which commercial leases differ significantly from residential renting.

Legal protections and rights in a commercial lease

Commercial leasing is governed by property law and contract law. A commercial lease agreement is a blend of both of those aspects of law, and gives rights to both the property owner (or landlord) and the tenant renting space (the premises). Certain rights and responsibilities fall under property law and others are under contract law—a complicated distinction which varies by jurisdiction and case law. Protections for the tenant against eviction in the winter, utility disconnects and rent increases do not exist in commercial lease situations like they do for residential rental properties. In addition, rights can be given up in commercial lease agreements that might not be permitted in the case of a residential rental agreement.

What is a net lease?

A net lease, or triple net lease, includes terms describing amounts that will be charged in addition to the rent. The rent shown on the face of the lease agreement is the base (basic or minimum) rent that will be charged. In addition to this, there will be tax, maintenance and insurance charges, collectively called TMI. The maintenance portion may also be called common area maintenance (CAM). There is no real difference between the meaning of net or triple net; both mean the lease has additional charges to the base rent amount that will be described more fully in the lease agreement. These additional charges can total as much as or more than the base rent amounts.

Basic cost components of a net lease.
A commercial lease can include base rent, plus tax, common area maintenance and insurance charges.

The TMI may be classed as operating costs or as additional rent; there’s a slight distinction in those terms and the remedies that can be used to cure a default, with the operating cost being part of contract law and additional rent falling under property law. These vary by jurisdiction, so it’s recommended to consult with a lawyer on those issues and whether it is worth negotiating one way or the other.

In rare cases, a commercial lease may be a gross lease where all charges are wrapped up into one rent payment (as in a residential rental agreement). This is more likely to happen when premises are small and the lease term is short, which can cause difficulty making additional rent calculations. It can also occur when the landlord lacks sophisticated commercial lease software that efficiently performs the required calculations.

What does proportionate share mean?

Commercial sites often have multiple tenants at the same time. In multi-tenant properties, the additional rent is usually allocated to the tenants on a proportionate share based on the rental area of the premises divided by the total rentable area of the building or site.

Commercial lease software takes care of the complexities of expense allocation.
Proportionate share means that tenants pay for actual usage or share of expenses, according to the lease terms.

The expense allocation process can be quite complex when there are multiple buildings on a site, or if not all tenants have access to or use the common areas. For example, a ground floor tenant may not want to be charged for escalator maintenance, or a mall tenant for the common loading docks servicing the stores in another wing of the shopping centre. The operating costs must be properly allocated to those tenants that are in the pool of users of the common areas and services.

In the case of vacancies, a charge called a gross up factor is applied to the shared common utilities that aren’t individually metered, such as central heating and cooling, water usage, cleaning and lighting. Vacant spaces typically have a lower heating/cooling demand (around 30% less) and don’t use water or produce wastewater. The amount of a utility invoice that is based on usage is then allocated to those tenants that are using them for the period covered by the invoice. The fixed charges are still allocated to the entire area connected to the services and that fixed portion of the vacancy cost is borne by the landlord.

Rentable areas of the leased premises may also be grossed up with a proportionate share of the common areas. Base rent will be charged on the grossed up rentable area and not just the rentable area of the premises. This is further complicated when the total rentable area changes on the site or building due to renovations, additions, or temporary construction shutdowns.

Some tenants with high bargaining power can negotiate fixed additional rent rates, or different types of caps on the annual increases in additional rent that will be permitted.

CRESSblue commercial lease software is available to landlords to do proportionate share and date calculations automatically, and can report on the allocations on a per invoice and aggregate annual basis for tenant audits.

Why all the clauses about operating costs?

Commercial leases use similar wording about what is an operating expense (Op Ex) and what is a capital expense (Cap Ex), but the practical application is quite different. There are no official definitions, and so whatever is in your lease agreement regarding the additional rent will be applicable to your situation.

Generally speaking, operating expenses are those incurred in the maintenance and operation of the building to keep it in its regular state of repair and efficiency. Capital expenses are those that make improvements to the functional ability of the property, significantly extend the life of the asset, or alter its use.

Operating expenses are recovered by the landlord from the tenant(s) through the additional rent charges. Only those expenses that actually occurred are to be charged to the tenant, so this category does not include reserve funds.

Capital expenses are to be capitalized in the landlord’s books and are depreciated. Neither the capitalized cost nor the depreciation is classified as operating costs. That doesn’t mean that capital expenses cannot be included for recovery from a tenant in a lease agreement; it just means that they should not be included in the operating expenses.

The real difficulty for both tenants and landlords is the gray area between Op Ex and Cap Ex. For example, how much of a roof repair constitutes a partial replacement? If 10% of the replacement cost is used as a guideline, can 1/20th of the roof membrane with a lifespan of 20 years be replaced each year as a “preventative maintenance Op Ex”? A landlord could avoid having a major Cap Ex entirely using this approach. Would this method be acceptable if the roof was already leaking? Maybe the tenants would appreciate never having a roof that leaks due to its old age.

One approach or the other isn’t necessarily right or wrong (unless the terms of the lease already dictate otherwise). Landlords will be better off by being transparent in their decision-making process in the terms of the lease rather than relying on ambiguity and a lack of reporting details. Most of the time this isn’t deliberate on the part of landlords; it is a lack of affordable sophisticated software that would allow them to better handle the complex calculations and record keeping. Newer solutions such as CRESSblue commercial lease software have significant capabilities in automating additional rent accounting.

Percentage rents and CPI increases

Leasing space for retail purposes often brings in a type of rent called percentage rent. In retail space like a shopping mall or plaza, the number of visitors to the centre is an important driver in the sales for the tenants. To ensure that the overall performance of the site is reflected in the rents charged to the tenants, there is a minimum rent specified in the lease agreement, and above the break point a certain percentage of the tenant’s sales from the premises is paid to the landlord as rent. The list of tenant products included in the percentage rent categories, the levels of sales and corresponding percentages, and exclusions form a complex negotiation and record keeping challenge.

In highly competitive markets, base rents may also be indexed to the Consumer Price Index (CPI). This allows the landlord to be protected from inflation, and the tenant to know that the rents are adjusted based on an independent third-party. The index to be used, the adjustment periods and the location basis of the index should all be specified in the lease agreement. Wording should also be included in the lease in case the index specified is discontinued, revised or replaced.

Leasehold improvements

Leasehold improvements are at the expense of the tenant. The landlord may offer various incentives to assist either in the construction, payment or financing of the improvements. The landlord will reserve the right to approve the work planned and may also insist that its own contractors be used for portions of the project. This can be for the purposes of maintaining warranty coverages, collective bargaining agreements, or simply because the landlord wants to use contractors it has previously vetted. The landlord may charge fees for having the proposed work reviewed by its architects or engineers.

Once the work is done, the leasehold improvements become the property of the landlord (provided they are not in the nature of trade fixtures, which typically remain in the ownership and control of the tenant). The tenant will be responsible for insuring and maintaining its own leaseholds.


The tenant is required to insure its own business, including general liability, as well as its leasehold improvements. The landlord’s insurance is normally secondary to the tenant’s insurance, and does not cover the tenant’s leasehold improvements even if the landlord assumes ownership of them upon completion. The landlord also doesn’t carry insurance for any of the contents in the premises, or for any business interruptions, however caused. It is important for a tenant to review its required coverages based on the terms of the lease, and also to ensure it is fully insured for its own needs.

Annual reconciliations

The additional rent is reconciled annually. A statement is sent out to all of the tenants for each property showing the expenses for the period, the tenant installment payments, and the shortfall or overpayment. The tenant may have certain rights in its lease to review the charges and calculations. There is typically a two year review period for either party to make an appeal or adjustments to the statement.

Why lease?

If commercial leasing is so complicated, why lease at all? Why would someone want to be a landlord or a tenant?

From the owner’s perspective, commercial property is expensive to build and to maintain. Commercial construction costs, property taxes and operating costs are higher than residential rates. It’s very costly to have vacant commercial space sit empty. Becoming a landlord and leasing the space to a tenant can significantly help with those carrying costs.

For a business owner, becoming a tenant can enable access to valuable space in a prime location without taking away from cashflow with a down payment. Having a landlord manage the building allows the tenant to focus on its business strengths without the distractions of building ownership and maintenance. It offers a more predictable way to operate a business, as well as flexibility to move and grow more rapidly.

It’s a business relationship

Lease negotiations are usually handled by commercial real estate brokers on both sides. Often, the actual tenant employees in the premises and the landlord’s property managers are not involved in the negotiation process at all.

It’s important for both sides to realize that commercial leasing is a symbiotic relationship. The landlord relies on the tenant paying rent and looking after the premises as a prudent owner would. Happy tenants stay, which reduces the broker commissions for the landlord, the incentives paid out on new leases and the vacancy rental losses. The tenant relies on the landlord to arrange for maintenance services, pay the taxes and operating bills on time, and to arrange and manage all the various contracts effectively and efficiently. If either party is deficient, the other one suffers as well. They might sit across the table, but both are on the same boat.

Commercial lease software supports good business

Clearly defined terms and expectations, effective communication and transparency are the keys to healthy landlord-tenant relationships. Efficient lease management and reporting is the basis of CRESSblue commercial lease management software.


This article is for informational purposes only and is not intended as professional advice; please consult a competent professional for advice specific to you. This blog is written to stimulate thinking on concepts related to commercial leasing. Please join the discussion with your experiences.

Martin Sommer, CEO, CRESS Inc.

Follow me on LinkedIn

Martin is a founder and the CEO of CRESS Inc., a Canadian SaaS company that automates lease administration and asset management. Martin also manages Karanda Properties Limited industrial portfolio as Director of Operations in all areas of commercial property management, including new development, asset management, capital expenditures, operations, leasing and lease administration of the industrial portfolio. Martin writes about property management workflow and issues. Book Martin to speak at your industry event.