Base Year Concessions in Re-Leased

What are Base Year Concessions?

Base Year concessions are a type of budget concession that allows you to set a baseline expense amount from a previous year, and then charge tenants only a percentage of expenses that exceed that baseline. This is commonly used in commercial lease agreements where tenants share operating expenses, but only pay their portion of increases above a specified base year.

Unlike other concession types that use either an amount OR a percentage, Base Year concessions require both values to be configured:

• Base Year Amount: The baseline expense amount from a reference year
• Base Year Percentage: The tenant's percentage contribution to expenses above the base amount

How Base Year Concessions Work

The Calculation

Re-Leased calculates base year concessions using this formula:

Tenant Contribution = (Prorated Expenditure - Base Year Amount) × Base Year Percentage

Important points:

• If the current expenses are below or equal to the base year amount, the tenant pays $0
• If the current expenses exceed the base year amount, the tenant pays the specified percentage of the excess amount
• The system automatically prorates calculations based on the tenant's lease term days
• The tenant's contribution will never be negative (minimum is $0)

Example Scenario

Let's say you have a lease with a Base Year concession configured:

• Base Year Amount: $10,000
• Base Year Percentage: 75%

Where to Configure Base Year Concessions

Base Year concessions can be configured at three different levels, depending on your lease agreement structure:

1. Budget Level

Apply a single Base Year concession to the entire budget for a lease. This is ideal for straightforward lease agreements where one base year amount and percentage apply to all expenses.

When to use:

• Simple lease agreements with uniform base year terms
• When the same base year applies across all expense categories

2. Schedule Level

Apply Base Year concessions to individual schedules (e.g., CAM, Utilities, Maintenance). Each schedule can have its own independent base year amount and percentage.

When to use:

• Different base year amounts for different expense categories
• Lease agreements with varying base year terms by schedule type
• Multiple schedules can have base year concessions simultaneously

3. Chart of Account (CoA) Level

Apply Base Year concessions to specific chart of accounts. This provides the most granular level of control, allowing you to set different base year values for individual expense line items.

When to use:

• Highly detailed lease agreements with specific base year terms per expense type
• When you need the finest level of granularity for base year calculations
• Multiple chart of accounts can have independent base year concessions

Setting Up Base Year Concessions

Required Information

When configuring a Base Year concession, you'll need to provide:

1. Base Year Amount (required)
   • Must be greater than 0
   • Enter the baseline expense amount from your reference year
   • This is typically the actual expense amount from a previous year
2. Base Year Percentage (required)
   • Must be between 0 and 100
   • Enter the tenant's percentage share of expenses above the base amount
   • This represents what portion of the excess expenses the tenant is responsible for

Configuration Steps

1. Navigate to the Budget Concessions page for your budget
2. Select the tenancy/lease you want to configure
3. Choose your concession method:
   • Budget Level: Select "Budget Level" and choose "Base Year" from the concession type dropdown
   • Schedule Level: Select "Schedule Level", choose a schedule, and select "Base Year"
   • CoA Level: Select "Chart of Account Level", choose an account, and select "Base Year"
4. Enter both the Base Year Amount and Base Year Percentage
5. Click Save to apply the concession

Validation Rules

The system will validate that:

• Both amount and percentage fields are provided
• Base Year Amount is greater than 0
• Base Year Percentage is between 0 and 100 (inclusive)
• You cannot save a Base Year concession with incomplete information

How Base Year Concessions Appear in Re-Leased

In Budget Concessions

When viewing a lease with a Base Year concession, you'll see:

• Concession Type: "Base Year"
• Display Format: "Base Year: $[Amount] ([Percentage]%)"
• Example: "Base Year: $10,000.00 (75.00%)"

In Budget Reconciliation

Base Year concessions are automatically calculated during budget reconciliation:

• The system uses the prorated expenditure for the tenant's lease term
• Compares it against the configured base year amount
• Applies the base year percentage to any excess
• Displays the final tenant contribution amount

Proration

Re-Leased automatically handles proration for partial lease terms:

• If a tenant's lease doesn't cover the full budget period, expenses are prorated to their actual term days
• The base year calculation uses the prorated expenditure amount
• This ensures tenants only pay for expenses during their actual occupancy period

Common Use Cases

Office Building Operating Expenses

A tenant leases office space with a base year of 2023. Their lease states they pay 80% of operating expenses above the 2023 baseline amount. You would configure:

• Base Year Amount: The total operating expenses from 2023
• Base Year Percentage: 80%

Retail Center CAM Charges

A retail tenant has a base year concession for CAM (Common Area Maintenance) expenses. They pay 100% of CAM increases above the 2022 baseline. You would configure:

• Base Year Amount: The CAM expenses from 2022
• Base Year Percentage: 100%

Multi-Schedule Base Year

A lease has different base year terms for different expense categories:

• CAM schedule: Base year $50,000 at 75%
• Utilities schedule: Base year $20,000 at 100%
• Maintenance schedule: Base year $15,000 at 50%

Each schedule would be configured independently at the Schedule Level.

Tips and Best Practices

1. Reference Year Selection: Choose your base year amount from a representative year that reflects typical expenses. This is usually the year the lease was signed or a recent year with normal operating conditions.
2. Percentage Considerations: The base year percentage typically reflects the tenant's share of the property. For example, if a tenant occupies 75% of the building, they might pay 75% of excess expenses.
3. Multiple Concessions: You can configure multiple Base Year concessions at the Schedule or CoA level. Each operates independently, so a tenant might have different base year terms for different expense categories.
4. Review Calculations: After setting up Base Year concessions, review the calculated amounts in budget reconciliation to ensure they match your lease agreement terms.
5. Documentation: Keep records of your base year amounts and percentages, as these are often referenced in lease negotiations and renewals.

Frequently Asked Questions

Need Help?

If you have questions about configuring Base Year concessions or need assistance with your specific lease agreement terms, please contact your Re-Leased support representative or refer to the Budget Concessions documentation.