Leases are bulky but essential documents in every real estate business. These documents carry important clauses, making lease management even more difficult. Reading leases every time a tenant wants to sign them can be time-consuming. Instead, lease abstracts serve as a summary of the original document. These abstracts contain important clauses which make them easier to understand.
Even though they sound simple, lease abstracts are complicated to prepare. Since they represent the lease, abstracts need to be accurate and contain all the details. If you want to prepare lease abstracts for your properties, our guide on how to solve the common lease abstraction issues will help you.
Why are lease abstractions important?
Lease abstractions are not mere summaries of leases but also have numerous benefits for the real estate business.
Easily explains lease terms to tenants. Tenants can skip reading the bulky lease and choose the abstract which contains the extract of the same information.
Improves investment by providing information to calculate risk factors. Lease abstracts collect all information in a single place that lets you study it easily and determine market risks.
Determines values of the portfolio by collecting relevant information.
Lease abstracts are easier to present to clients. They can go through and understand your property management process without reading complex clauses.
Typically, a lease abstract is about 3 to 5 pages long. To condense the lease within these limits, employees have to face numerous challenges.
Common lease abstraction issues
Compliance with lease accounting standards
The Financial Accounting Standards Board (FASB) has released new lease accounting standards. This has set new guidelines for lease data management, making abstractions more complex. Real estate companies without organized data management plans find it difficult to meet these new guidelines.
Lease abstracts need adequate data to comply with the new standards. But many real estate businesses lack the storage and information to ensure FASB compliance. This can be a significant lease abstraction challenge. If the abstract doesn’t comply, then the business can face legal consequences. Adding to it, FASB standards also change from time to time, which means the leases need to be updated.
Bulky documents
Bulky lease documents and complex terms are the hardest to abstract. Since lease abstracts need to be short, you have to find important clauses from the document while making sure nothing is left out.
The real estate industry also uses traditional methods even if it is slowly upgrading to technology. So, most leases are manual work that requires employees to study them extensively to prepare the abstracts.
Moreover, disorganized data requires employees to scour through multiple documents to obtain the required information.
Extracting important data
Identifying which clauses are important is another challenge of lease abstractions. Bulky leases have more important clauses but the abstracts still need to be short. It is a task to summarize bulky leases by filtering additional information.
A lease abstraction typically includes:
The property address and basic tenant information.
Rent and security deposit information.
Any information regarding tax, maintenance, and CAM.
Lease renewal and termination clauses.
Lease termination clauses
Apart from these, any other information that can impact tenancy should be included in the abstract. Companies that do not create and store leases online face difficulties while recovering relevant data for their business. Excluding even a single important detail in the abstract can have a negative impact on tenants.
How to overcome these challenges?
Lease abstracts are challenging. But with the right resources, you can create accurate, legally complying abstracts. The below solutions help you clear your lease abstraction issues and also create better abstractions.
Use the latest technology
Lease data management is the basic challenge property managers encounter during abstractions. If you manage leases on paper or spreadsheets, then it is time to upgrade to new technology. According to Market Watch, 88% of spreadsheets have errors. Instead, you can use specific software to organize and manage data.
You can choose off-the-shelf software that is designed to suit most businesses. Or, you can integrate multiple software on a single platform, which lets you customize the software according to business needs. Companies like KriyaGo help integrate top property management software so you can leverage all the features in a single place.
Update lease data
Currently, leases are made in compliance with the FASB standards. As times change, these standards are also continuously updated. Though lease abstraction is a one-time process, it needs to be regularly updated with the latest information. This is to ensure that you are legally safe and disclose all the information as directed by law.
Tag the abstracts
Lease abstracts have their origin in the lease documents. If you are making leases online, then it is easy to tag any important terms and clauses in the abstract. This will help you look up the clause in the lease.
By keeping track of what information goes on the abstracts, you can also change them according to standards. Bookmarking also helps you review and remake abstracts, in case they are too long or short.
Outsource lease abstractions
The best way to create perfect lease abstracts is through outsourcing. Managed service providers have expert employees with relevant work experience. These experts identify important clauses and create lease abstracts suiting your requirements. They can also update leases from time to time and keep track of any changes in the FASB standards.
Outsourcing lease abstractions can also help you save money while ensuring quality. Good abstracts have a positive impact on tenants and help you build a better brand image.
Create perfect lease abstract with KriyaGo
Can’t manage the bulky paperwork? Let KriyaGo handle it for you! Our experts have relevant experience in creating lease abstractions for real estate businesses. Regardless of the size of your business, we can strategize and help you with lease abstractions and administrations. We also help our clients with back-office accounting and CAM reconciliation.
KriyaGo also integrates real estate software to create bespoke software for businesses. Whether you want better CRM software or want to organize your data, we have the right tools for you. Integrate more solutions and streamline productivity the easy way. Take a look at KriyaGo Blox today!
