What is Lease Administration And How To Effectively Manage It

November 8, 2022
Alok Suman
Lease Management

Lease administration is one of the most misunderstood and overlooked concepts regarding commercial real estate. A lease was always seen as an expense of the company and little attention was given to it. 

The main activity of a lease administration team in a real estate business is receiving and managing rents and payments from tenants of the property these businesses own. 

Commercial real estate (CRE) companies have started emphasizing lease administration because of the sensitive financial, accounting, and legal information it handles. 

The sudden change is due to the strict compliance standards proposed for commercial real estate businesses. Now, lease administration is more important than ever and must be properly documented to comply with the laws.

In this article, you'll learn more about lease administration, its importance for passing compliance laws, and how to manage it effectively using software. 

What is Lease Administration? 

Lease administration is a continual process of checking whether the lease's key business points and legal information are being adhered to. 

It is like ensuring that the rents are being paid on time and keeping an eye on maintenance and other expenses relevant to the leased property. 

Lease administration deals with lease negotiation, liabilities, lease structure, upcoming renewals, reports, bookkeeping, etc.

Why Is It Important? 

Here's why it's important:

Deals with large expenses 

Lease administration deals with multiple sources of expenses, not even in hundreds and thousands - lease contracts deal with millions in costs.

With a streamlined lease administration process, managing these large expenses and the complex paperwork can be a smooth process. 

Lease renewals  

Lease administration ensures that every process within a lease contract flows smoothly and on time. Without this process, it may lead to unintentional lease renewal, which might cause a huge loss in revenue. 

Delayed payments 

With lease administration, it'll be easier to keep track of the payments and rents, avoiding unnecessary delays and penalties, which increase your expenses. 

Compliance issues

A lack of lease administration will lead to delayed payments and poor journal entries. Most of the lease administration process is performed manually using documents and spreadsheets; this will make it harder to keep off the expenses and save time. 

This delayed response can lead to compliance issues and might put your organization under scrutiny by the law. 

What is Lease Management Software?

Lease management software is used to automate, manage, track and streamline your lease contracts. 

Every aspect of a real estate business, from lease contract workflows and automated rental payments to compliance, reports, and analytics, can be easily managed using lease management software. 

Most lease contracts are managed manually, leading to high workloads, human errors, and discrepancies which can lead to a loss in revenue and might give rise to suspicions among stakeholders. 

But all of this can be easily eradicated using lease management software, as it will automate all the repetitive tasks and help you build automated workflows for collecting rent, scheduling payments, and more. 

A lease management software can help you:

  • Track your business performance in real-time with insightful analytics from one dashboard. 
  • Automate journal entries and automation.
  • Save time and energy from manual tracking and bookkeeping. 
  • Retrieve information from complex lease documents more easily.
  • Eliminate risk issues involved with documentation using spreadsheets 

What is the Most Efficient Way to Manage a Lease?

A lease is not just a simple contract written on paper that can be altered whenever needed. It contains sensitive business, financial and legal information that has to be handled with ease. 

  • Some businesses have an in-house team for the lease management process manually. Businesses have been actively outsourcing their lease management so that they can focus more on their business. 
  • Outsourcing such a sensitive process is not always the right practice. It is better to manage your lease contracts in-house.
  • Instead of using manual processes, which are more susceptible to mistakes and discrepancies, you use lease management software to manage your leases efficiently. 

Tasks Related to Lease Management

Lease management refers to a process after the lease contract is signed. 

  • Once the lease documentation is signed, it'll be transferred to multiple departments for further verification and approval.
  • Post the contract approval, it'll be stored in the repository, server, or repository in case of physical documents.
  • The lease abstraction process follows, where the important details of the lease contract will be summarized into an easily accessible and readable document for better tracking and review purposes. 
  • Then the lease abstract will be subjected to a detailed review/audit process to ensure no irregularities are present in the contract. 
  • The lease needs to be set, after which the tracking for rent and payments will begin. If lessees fail to pay on time, they might be subjected to escalations. 

Who is in Charge of Lease Management?

Businesses differ in their lease management process - some businesses have special departments to handle leases; some real estate businesses use experts or a single person to handle lease management. 

Individuals involved in managing leases are called lease managers or lease administrators. Typically, a business uses a team of lease managers to handle their lease instead of just one. 

Especially in large real estate businesses, more than three to four lease administrators take care of the financial, business, and legal details entailed in the lease management process.

Since the arrival of lease management software, businesses have relied on just one or two lease managers to handle the work, as most of the processes are automated using software. 

The important aspect of lease managers is that they must understand all the complex nuances involved in lease contracts. They must be better communicators so they can instantly interact with all the parties involved in the lease management process. 

Lease Administration Made Easy 

Lease administration is the activity of tracking, managing, and ensuring that the lessees follow the details present in the lease. 

The manual lease management process can be tiresome - a huge volume of paperwork must be audited and stored daily. 

Businesses can use lease management software like LeasO to automate their lease process. LeasO lets you build workflows, automatically generates invoices and receipts, tracks renewals and rents, and much more. 

So, if you're looking for robust lease management software to handle all your lease contract processes, get in touch with us today.

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