Editor’s note — here are all the posts in this series for easy reference:
- Real Estate Management Overview, Part 1
- Real Estate Management Overview, Part 2
- Real Estate Management Overview, Part 3
- Real Estate Management Overview, Part 4: Creating Leases
- Real Estate Management Overview, Part 5: More Leasing Details
- Real Estate Management Overview, Part 6: Lease Administration Walk-Through
- Real Estate Management Overview, Part 7: Site Acquisition & Lease Controls
- Real Estate Management Overview, Part 8: More Lease Controls & Options ()
- Real Estate Management Overview, Part 9: Payables/Billing, Expense Audits and Security Deposits
- Real Estate Management Overview, Part 10: Reporting & Analytics, Plus Closing Comments
Welcome to Real Estate Management overview #5. This week’s discussion will be about how to validate, activate, maintain and amend leases and is a continuation of last week’s post in which we discussed creating a Payables (tenant) lease.
The next step after you create a lease is to run the validation process which checks for any required missing financial terms that you may have overlooked or to verify that property ID, occupancy date and region code fields have been completed. Once the lease has been validated, the lease can then be activated and financial processing against the lease can begin.
To validate a lease, navigate to the path below and find your lease, select Validate Lease from the Action menu and click the Go button. If errors are found, click the error button to view and resolve the errors. If no errors are found, the lease will be ready for activation.
To activate a lease after it has been validated, select Activate Lease from the Action menu and click the Go button. Once the activation process has completed, the lease status will change to Active and the lease will now be ready to create financial transactions. From a portfolio management standpoint, Real Estate Management gives you the option to both create leases and activate them in single process or the option to create leases and place them in a queue where you can activate each lease as needed.
Next, let’s discuss maintaining and amending leases.
Maintaining a lease is defined as changing certain general information fields on an active lease that do not affect the fundamental financial terms and obligations of the lease.
Lease data that can be changed as part of lease maintenance are lease name, lease administrator or portfolio manager, options and critical date notifications, notes and contacts. Note that the status of the Lease still remains active after you make any of these changes and you do not need to re-validate or re-activate the lease.
Of special note during the maintenance process: Real Estate Management grays out and protects all fields on your leases that would otherwise require an amendment, and only allows you to change the fields mentioned in the paragraph above. If you need to change data which does affect the financial terms or obligations of your lease, then you must initiate the lease amendment process which we will discuss next.
First let’s discuss some basics on lease amendments. A lease amendment is defined as any change to an active lease that alters the fundamental entitlements and obligations of the lease. From a business process standpoint, lease amendments do not affect the originating active lease until the amendment is processed, reviewed and activated. As a result, an amendment does not affect future processing of a lease until you activate it.
Here’s a quick primer on some tab/navigation specifics.
On the General Information tab, fields that you can amend include landlord or tenant, commencement dates, termination dates, signature lease dates and property information. Note, if you add new properties, delete properties, change existing properties or select a new primary property, the fields that you can change include the useable area, the rentable area and the occupancy date.
On the Financial Terms tab, the following fields are available for amendment: base year amount, base year, exclude base year amount, proration, method, maximum operating expense increases, maximum lease rent escalation. Further pages available for amending from the Financial Terms tab also include the base rent page, operating expense page, miscellaneous rent, financial terms, percent rent and security deposit pages.
When you create an amendment to a lease, the status of that amendment is set to pending.
To update the lease with the new terms, you must activate the amendment. To effectively monitor your amendments, each lease has an Amendments History page where you can view amendments for that lease.
The three main steps for amending a lease are:
- Creating the amendment,
- Editing the amendment, and
- Activating the amendment
Once you activate an Amendment, the system sets the amendment status to active and the values that you specify for that amendment become the current active lease values. The changes will then be reflected in all future transactions and will not affect any current transactions that have not been completely processed.
Next week we will go into a walkthrough of actually amending a lease, complete with a bevy of screenshots. Hopefully this week set the conceptual stage for you. Stay tuned.