Calculating Lease Costs Without a CPA
Certified public accountants (CPAs) don’t work for free. And if you know math, you may not need one to calculate your own real estate tax, cost-of-living increases, operating expenses, and other lease costs you pass along to tenants. However, the money you save on CPA fees by doing your own cost calculations may be more than washed out by the liability costs you incur if your lease requires a CPA to prepare those figures.
Landlord Pays for Skipping the CPA
A New York landlord learned this lesson the hard way. The lease contained a clause saying that a CPA had to prepare the real estate tax, cost-of-living increases, and operating expense figures the landlord used in calculating the tenant’s payment obligations. When the tenant stopped paying rent, the landlord sued the tenant for rent and its share of the unpaid taxes, cost-of-living increases, and operating expenses.
We don’t have to pay our share of those costs, the tenant replied, because the landlord calculated the figures itself rather than using a CPA as the lease required. While conceding the point, the landlord noted that the calculations were based on easily obtained government statistics. From there, it was just a matter of simple math.
But the court wasn’t impressed. Yeah, maybe it didn’t take a rocket scientist or, more precisely, a CPA, to crunch the numbers. But that’s what the lease in this case expressly required. Since the landlord ignored the requirement, it had no case against the tenant. Come back after you have a CPA prepare the numbers and rebill the tenant properly, the court instructed [255 Turnpike Assoc. v. Sunie Gifts & Stationery, Inc. (NY Civ. Ct. Housing Pt 18)].