Historically, the term “lease administration” has been synonymous with software designed to manage the lifecycle of real estate assets. However, there are a handful of vendors focused on equipment lease administration software (sometimes called equipment lease management software). In this article, we have created a single list of real estate and equipment lease administration software features.
What are the Most Important Real Estate Lease Administration Software Features?
Manage the workflow, validation, and disbursement of payments for leases. The line items on invoices received from landlords should be compared to the expected payment amounts calculated by the lease administration system. Inconsistencies in CAMs charges, variable rent calculations, and estimated property taxes should be identified. Once any discrepancies are resolved, the lease administration system will notify Accounts Payable of what amounts should be paid against the invoice.
Real estate invoices are prone to error; some studies suggest that 60% of all landlord bills are incorrect. Lease administration applications can identify billing errors automatically or enable real estate experts to pinpoint the mistakes. The result is a reduction in late fees and commencement data errors as well as faster collections of security deposits and tenant improvement reimbursements.
Critical Dates and Clauses
All critical contract dates for expansion options, renewal options, and termination options are tracked by the lease administration system. Decision makers are automatically notified of upcoming deadlines – whether those are in the middle of term or at the end of term. Workflows ensure that all interested parties and systems are kept up to date on elected options and costly holdover penalties are avoided.
Lease administration systems allow real estate groups to manage tenants and subleasing arrangements. The software can generate sublease invoices, passing on percentages of CAMs charges and leveraging complex variable rent calculations. Additional capabilities might include tracking receipts for each tenant, reporting on aged delinquencies, and posting credits to accounts receivable systems.
What are the Most Important Equipment Lease Administration Software Features?
Lease versus Buy Analysis
Ensures that buyers are making the best economic decisions for the business by comparing the cash flows, accounting treatment, and tax impacts associated with purchasing or leasing a particular asset. Lease versus buy analysis tools factor in a company’s incremental borrowing rate, tax depreciation methods, debt, equity, and AMT rates in their analyses.
Automate the business processes associated with sourcing new equipment leases. Financing RFPs can be automatically generated then distributed to a marketplace of lessors for competitive bids. Proposal responses can be automatically ranked and analyzed to provide side-by-side comparisons of financing rates and end-of-term options.
Partial Buyouts, Returns, and Renewals
Leased equipment assets such as trucks, computers, and forklifts may be damaged, stolen, or lost during the term of a lease. In these scenarios, the missing or destroyed assets are purchased during the middle of the term. At the end of lease, some assets may be returned, while others are purchased or renewed. Lease administration systems can track these complex partial buyout, renewal, and return scenarios during the middle or end of term.
End of Term Management
Equipment leases typically require advanced notification of plans to return, renew, or buyout assets before the end of term. Lease administrations systems track all critical dates associated with end-of-term notifications. Decision makers are provided with the economics and logistics of various options to make a timely decision. Workflows ensure that all interested parties and systems are kept up-to-date on decisions and that unplanned evergreen fees are avoided.
What are the Lease Administration Software Features Common to Both Equipment and Real Estate?
An enterprise-wide repository of master data about your leases. It should include all the assets leased along with the associated lessors/landlords, contact information, payment schedules, contract lengths, and end-of-term options. Ideally, the leasing database should store all the supporting documentation associated with each lease as well, which might include copies of master lease agreements, schedules and addenda, purchase orders, invoices, maps, and site plans.
Lease administration systems typically have automated processes for uploading new leases into the application. Data abstraction features leverage optical character recognition and artificial intelligence technology to scan leases and pinpoint the key contract details such start and end dates; base and variable rents; and renewal, termination, and purchase options. More advanced data abstraction tools might have the ability to perform data quality checks.
A better approach to uploading data into a lease administration system is to integrate with the business applications that are the source of the data. These source applications are typically the CRM systems of landlords and lessors. Ideally, Lease administration applications would also be integrated to accounts payable, accounts receivable, and lease accounting systems as well.
KPIs and Reporting
Lease administration systems help managers assess the economic performance of their lease portfolio. Dashboards provide views of expected to actual costs for particular geographic regions, business units, or asset types. Examples of Key Performance Indicators (KPIs) tracked for equipment leases might include the number of leases in evergreen status and the number of late end-of-term notifications. KPIs for real estate leases might include average costs per square foot or days sales outstanding for subleases.