What is Lease Abstraction And Why You Need It

November 4, 2022
Alok Suman
Lease Management

Commercial leases can sometimes be frustrating as they contain long, complex documents, which is why the importance of lease abstraction has risen. 

Lease abstraction aims to simplify complex lease documentation. It is a summarized version of important lease terms, conditions, and relevant lease data derived from the original lease document.  

While lease abstraction is known to simplify lease management, extracting all the important information and data from lease documentation can be time-consuming too. 

You need to have a detailed understanding of lease documents to ensure lease abstraction successfully. This article will guide you through the concept of lease abstraction and why it is essential for your business. 

What is Included in a Lease Abstract?

You know that lease abstraction is the process of summarizing important data from lease documents. But what exactly does a lease abstract contain?

A lease abstract will contain all legal, financial, and business data relevant to the original lease document. It will include details like:

  • Basic tenant and landlord information like name, address, etc.
  • Square footage space.
  • Lease term and its expiry date.
  • Options for renewal.
  • Past, present, and future rents of the tenant.
  • Right to renewal.
  • Base rent amount of the tenant.
  • Possible escalations of rent in the future.
  • Provisions, maintenance, and tax details.
  • Termination clause.
  • Details about the tenant's first right of refusal in the case of sale or leasing additional space.

How Does Lease Abstraction Influence the Lease Management Process?

Lease management is a complex process, especially for enterprise-grade real estate businesses.

With loads of crucial information to be documented daily and essential date tracking, financial bookkeeping, and reporting, lease management takes a lot of work. 

Imagine going through this grueling documentation process every day. Real estate teams do this manually using spreadsheets and PDFs. This is what lease abstraction platforms can change. 

By leveraging the automation process, lease abstraction platforms can make lease management easier for real-estate teams. This software can automatically summarize complex information from lease documents within seconds. 

Here is some of the information that is critical for real estate portfolio management and managing accounting and finances:

  • Termination dates
  • Common Area Maintenance (CAM) charges
  • Taxes
  • Rent forecasts
  • Violation of conditions

Extracting these crucial data without the help of lease abstraction software would be a huge undertaking. This is how lease abstraction influences lease management by making the process easy. 

Why are Lease Abstracts Necessary?

The main reason lease abstracts are necessary is that they help property management companies, contractors, agents, property owners, and tenants save time and stay clear on their scope, terms, and obligations.

Here are a few more reasons why it's needed:

Effective Management 

As mentioned earlier, commercial leases contain complex and highly critical legal and financial data. You need a team of experts to interpret these nuances and effectively manage this information. 

This is where a lease abstraction platform can help you. It simplifies the difficulties in lease management and helps real estate owners enhance their portfolios with real data on their lease agreements.

In simple terms, lease abstraction makes complex lease contracts easily accessible for everyone involved in the business. 

Enhanced Accuracy 

A lease agreement will have heaps of information; manual bookkeeping can be time-consuming and tiresome here. If there is a deadline, these manual data entry tasks will become prone to human errors.

Remember, lease agreements contain sensitive legal and financial information; one small error can lead to huge discrepancies and rifts between the parties involved. But with an automation lease abstract software, manual data entry can be set aside. 

Nowadays, lease abstraction software is AI-enabled. It can retrieve all the important information and organize and store it in an easily accessible database. Lease abstraction can thus minimize human errors by leveraging automation. 

Save Time 

Manual record keeping is done in spreadsheets and documents; reviewing all these pieces of information during risk analysis can be time-consuming. 

Fortunately, lease abstracts save time for investors by providing well-presented key data that enables them to assess and understand lease risks rapidly.

Increase Revenue 

Lease abstracts effectively track the expenses of tenants, owners, etc. 

Managers can analyze these charges regularly and request compensation from the company to enhance cash flow and keep their company from incurring excessive expenses.

Automating your portfolio management will help managers streamline their revenue. It keeps the managers updated and prevents the revenue from seeping through loopholes. 

Benefits of Using Software for Lease Abstraction

A lease management software is not just used to simplify lease contracts; it can also automate repetitive tasks like payment, rents, etc., and assist in financial analysis. 

Automated lease management software leverages AI, data analytics, and ML to streamline your lease management process. 

Lease management software lets you build automated workflows based on your lease contract. It can make collaboration easy and also automatically assign tasks to respective individuals.

Here are some more benefits of using software for lease abstraction:

  • You can customize your contract management from end to end.
  • The software will automatically alert you when renewal time is up, or the rent escalates.
  • Rent receipts can be generated automatically after rent payments.
  • You can automate payments and generate receipts easily.
  • You can create invoices that require tax details.
  • You can easily manage your property payment from anywhere. 
  • Owners can schedule reminders for payments and generate rent bills automatically. 
  • The software can easily integrate with your bank accounts, cards, and POS systems.
  • You can easily map and attribute lease data. 

LeasO is a platform capable of automating your complex lease contracts and helping streamline your real estate business with effective lease management. 

Track Your Lease With Ease

Lease management is complex as it deals with sensitive information like personal details and legal and financial data. Managing it manually can be a tiring task. 

This is where lease abstraction comes in - it simplifies the complex lease management process and makes it easily accessible for all the parties involved in a lease contract.

From automating tasks to alerts, reminders, generating receipts, creating invoices, etc., software like LeasO can make your lease management process extremely easy. 

So, does your team still use documents and spreadsheets for lease management? It's time to automate your process with robust lease management software and simplify your lease contracts. 

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