There are two key phases to the successful utilization of off-campus real estate. The first is the acquisition phase: identifying the best property and structuring the best deal, whether a lease or an acquisition. The second is the management phase: how the property is dealt with once occupied.

For many organizations, "management" means a focus on the physical operation of a site, and on the traditional property or facility management functions such as cleaning, maintenance, heating, cooling, and the like.

Of equal importance is the area of Lease Administration and Management. Regardless of whether your institution is the owner of a property or a tenant, knowing your rights and obligations under a lease, and understanding areas of potential legal and financial liability, are crucial to achieving the most cost effective and successful occupancy of a site.

Organizations invest significant time and money in negotiating the best deal possible. The resulting lease specifies the full agreement between the parties. Absent good lease administration practices, deal points with the potential for significant financial impact over the lease term, can be easily circumvented or forgotten.

5 Best Practices for Lease Administration

1) Fully executed copies of all leases, amendments and modifications should be held in one central location. Ideally, digitized copies of all executed documents should be stored on a central server with access available to the legal and facilities departments.

2) A Lease Abstract should be prepared for each transaction immediately upon document finalization. Abstracts should at a minimum include: lease dates, rent terms, option rights, security deposits, expense treatments, maintenance obligations, subletting rights, and a list with dates of all executed documents. Alternatively, institutions utilizing lease management software should input lease data at this point.

3) Tickler files should be established for all dates, including, but not limited to: lease expirations, option notices, and scheduled rent increases. Most lease management software includes this function.

4) Written notice to Accounts Payable of expenses to be paid directly by tenant (utilities, condominium fees, taxes), and the due dates and amounts due on account of rent and additional rent payments. Year-end reconciliations of operating expenses should be scheduled in a tickler file, and any changes to amounts owed should be confirmed with facilities prior to payment.

5) A contact list for each property should be established and updated for each new transaction. The list should include contact information for: property owners, property managers, leasing brokers, attorneys, on-site property superintendents/engineers, utilities servicing the site and relevant account information, security companies, and any other vendors contracted for by the hospital to provide services to the property. The answer to any question of "who do I contact" should be included on the contact list.

The accuracy of the above information is the key to its usefulness. Responsibility for the maintenance of this database, whether computerized or on paper, needs to be clearly assigned. Similarly, decisions regarding who has access to the information and the ease of that access, will also impact the effectiveness of lease administration efforts.

The proper lease management software is often key to a successful lease administration function. Not every institution has a high enough number of off-campus holdings to necessitate the investment in software, and there is no hard and fast rule as to what size portfolio justifies the investment. However, for institutions planning to increase their off-campus locations, it is much easier to establish and populate a database when the number of holdings is low, then playing catch-up at a later date.