Please Rotate Your Device
The definition of lease abstracting in commercial real estate is the process of summarizing the most important elements of a commercial lease into one document. The main elements covered are rent, square footage, costs (net rent, additional rent, deposits), specific tenant rights (such as expansion rights and renewal rights), landlord rights (such as the right to relocate the tenant and right to terminate the lease), personal guarantees, and timelines (expiry date, and notice dates).
Once a landlord owns enough property to have a high number of tenants, it is useful for them to have a lease abstracting system to be able to quickly reference the high-level details of each lease.
Likewise, tenants who grow and have multiple locations typically aim to centralize their leases with one person or department in charge of real estate and some system for organizing and summarizing the leases.
Commercial tenants with just one location can also benefit from a lease abstract to be able to reference the important points of the lease without having to sort through the master lease.
LeaseProbe, established in 2004, is the leader in the lease abstract industry. They offer services to landlords and tenants alike. They also provide common area maintenance (CAM) review services and they draft estoppel certificates and SNDA agreements for landlords.
They certainly appear to be very credible. It should be noted however, that their target market appears to be tenants with multiple locations, and small landlords, also with multiple locations. Their case studies section details clients that have 50, 450, and 5,000 locations respectively.
They have a nice resource section on lease abstracting, including a sample lease abstract form.
You will notice however, that their lease abstracts are typically very clinical and summarize lease terms but do not offer any opinion of value.
For example, this is screen shot of their abstract template, they denote this landlord's relocation right, but have not offered any insights on how to improve this clause.
For instance, not being relocated in the first two years of the lease, not having to pay for any square footage this is larger than the existing space, and receiving some free rent as compensation would all be suggestions to make a relocation more palatable for a tenant.
Note that LeaseProbe is one of 6 companies under the umbrella of Madison Commercial Real Estate Services.
They claim that they have over 100 lease abstractors, but it is unclear if that includes all 6 companies (which they state are "independent" but related).
There is no information provided on the experience level of each lease abstractor, but they mention that each lease is proofread once completed.
There is no pricing information on their website and although they say you can upload your lease through their website they do not appear to have a checkout process.
Run by Craig Melby, a practicing sole-proprietor real estate broker in North Carolina.
Craig has over 30 years experience as a commercial real estate agent and his practice is now focused on providing virtual real estate advice to tenants in and outside of his market.
There is an enormous amount of content on Craig's blog and he has regular podcast episodes and YouTube videos as well.
Craig holds real estate licenses in Florida, North Carolina and South Carolina, so he can act as your real estate broker on those markets as well.
LeaseSmart has two plans:
1) $875 for a consultation and follow up consultations, but it is unclear what kind of report you will receive, if any report at all.
2) $2,000 or half of one month's rent (whichever is greater). In exchange, LeaseSmart will negotiate the lease on your behalf.
The checkout process is awkward.
There is no shopping cart to upload your lease and select your payment method.
You actually have to email your lease to one email address and then email your payment to a Pay Pal email. Then you also have to schedule a time for your consultation. And there is no mention about how long the lease abstract will take, and no calendar function to know how soon you can schedule your phone call.
LeaseSmart is very committed to educating commercial tenants and seems like a credible service, but should improve their user experience on their site.
Run by Todd Dorn, a real estate veteran of over 30 years. Todd worked for a major landlord for much of his career and is using the secrets of the trade to now represent the other side...lease abstracting for tenants.
Some impressive clients listed, though it is not clear if those are clients as the Lease Doctor or from his previous real estate career.
Never the less, he has read and modified over 2,000 commercial leases.
The free information about leasing on the site is thin and there is not much commitment to education on the website, but the choices in services and pricing model is creative:
Not sure what a $100 "other consultation" would be, but a $139 for a 30 minute call is an interesting alternative if you have some questions but do not need a full lease abstract.
$495 for the initial review seems reasonable, and a phone consultation is included, but it is unclear from the website what you actually receive for the money - there is no lease abstract template shown.
It also appears that once the first lease review is completed, there is no further communication or feedback, unless you order another package (the Second Lease Abstracting Review package).
The checkout process is clean and elegant:
The owner is a sole proprietor who has a unique skill set...she is both a realtor and a paralegal who does lease abstracting.
No new content posted to the blog in 2017, but the references appear to be very credible. You can also schedule a free, 30 minute consultation through a scheduling plug-in on the website.
There is no sample report provided, so a prospective customer does not know what the finished product will look like.
There is also no pricing. There are 3 packages available, but each package actually lists the same deliverables. The only difference is each heading.
As you can see, why would you not just get the basic package, as it lists the same items as the comprehensive package.
The sales page also indicates that someone will contact you within 24 hours of uploading your lease, but no statement about when you will receive the lease abstract.
So while this may be a credible service, it is unclear whether you can enter payment information on the website, and your lease must be uploaded before you even find out what the prices are.
First, let's talk about the commitment to providing a wealth of free information for businesses that are a little stuck on a real estate matter.
We also built the largest glossary of commercial real estate terms on the internet...over 12,000 words. BOOM!
Ease of use - not to toot our own horn, but there simply is not an easier to use website with respect to uploading a commercial lease for review.
Guaranteed turn around time...per our packages, we state and guarantee 24 hours for the silver and gold packages, and 36 hours for the bronze package.
Note that we do not term our service as a lease abstract. That is because we believe a conventional lease abstract simply points out salient points of a lease. But our service actually denotes our opinions on lease clauses, so it's not just a review but also an expert commercial lease opinion.
Here is an example:
We also provide a detailed email to you, outlining our thinking on each clause.
Here is a sample email one of our clients recently received:
So if you are confused with our lease abstracting score card, everything is explained in the body of the email to you.
Also note that you only receive a phone consultation in the gold package, but our lease reviewers are available for questions and answers by email.
Also note that when we receive a lease in Word format, we just go ahead and redline the document so that it is ready to be sent back to your landlord.
Our target market is the typical small business owner...not landlords.
Lease Ref is currently the only lease review or lease abstracting service that rewards you for a smaller lease size.
Our current rates are $225 for a small lease (15 pages or less), $420 for a lease of any size, and $625 for any sized lease, plus a phone consultation.
All packages have on-going Q & A with your sales rep.
Commercial real estate lawyers can serve two purposes in assisting a business with their real estate lease:
1) Review the lease and provide feedback
2) Negotiate the lease on the tenant's behalf, either with the landlord or the landlord's lawyer.
A lease abstractor on the other hand typically provides the service of summarizing a lease but does not become involved in negotiating a lease.
A commercial real estate broker will typically review a lease as part of a commercial real estate transaction. In essence, a tenant can receive a free lease "abstract" as part of the process, so long as they are committed to working with that broker to investigate relocation options and to work with that broker on the lease renewal.
Note that a commercial realtor's role is different from an abstractor or lawyer. The broker has been hired to scout out potential relocation alternatives...something the lawyer and abstractor do not get involved in.
The broker will also be the one negotiating the lease. So it is an entirely different role.
The jury is out on this one.
By default most people assume that a lawyer would be the most qualified, given their level of education required for their position.
But a great broker or great lease abstractor may be better than a bad lawyer.
There can be legal nuances that only a lawyer would know about, but most commercial lease negotiations are actually devoid of any legal issues.
There are also plenty of lawyers who have consulted on leases and have never had to reference any case law.
A broker has the advantage of being able to draw from real life experiences.
For instance, a broker may know that the gross up factor in a specific building is double the market average and may therefore flag the measurement clause to be modified. A lawyer or lease abstractor may gloss over such a clause.
A lease abstractor has the advantage of being paid a fixed fee for an opinion.
A broker's opinion on a commercial lease could be tainted by the fact that the real estate broker fee is only paid if a deal happens. Therefore there is an incentive to not flag specific clauses, as making these clauses more favorable for a tenant will take the deal longer to finalize.
Likewise, a lawyer is paid by the hour. So to increase billable hours is to increase revenue.
The most expensive way to negotiate a commercial lease is usually the one without any advice whatsoever.
If you want to investigate alternative options, you certainly will want to enlist a commercial real estate brokerage.
If you want to negotiate directly with your landlord you will still want to empower yourself with a trusted advisor so that you know what to ask for. In that case you should determine if you want to work with a broker, lawyer, or lease abstractor.
Oh, one last thing. If you want to visualize how we go through our lease abstracting process, check out this super serious lease abstracting explainer video...