For many multifamily investors, lease documents are stored away after signing—rarely revisited until a problem arises. But a regular lease audit can be one of the simplest and most effective tools to increase NOI and asset value.
What Is a Lease Audit? A lease audit is a detailed review of every active lease within a property to verify financial accuracy, compliance with property policies, and alignment with current market conditions. It uncovers outdated terms, revenue leaks, and overlooked opportunities to optimize cash flow.
Why You Should Care: Multifamily leases are complex and often evolve over time. When not reviewed, errors or omissions can quietly reduce profits. A comprehensive audit helps you:
- Identify under-market rents
- Enforce overlooked charges (pet rent, parking, storage)
- Ensure legal compliance and risk management
- Prepare the asset for refinance or sale
What to Audit For:
- Rent Roll Consistency: Ensure lease amounts match the rent roll and accounting system.
- Market Alignment: Compare in-place rents to current market comps. Adjust accordingly at renewal.
- Fee Capture: Validate that all applicable fees (utilities, pets, amenities, late fees) are being charged.
- Lease Expiration Dates: Look for clusters of expirations that may expose you to vacancy risk.
- Legal Clauses: Ensure leases protect ownership rights and are updated for local regulations.
How Often Should You Audit? At minimum, perform a lease audit annually. Ideally, conduct one during major milestones:
- Prior to refinance
- Before listing the property for sale
- After major tenant turnover or rent changes
Real-World Example: A 120-unit property had not reviewed leases for over two years. After a lease audit, management discovered that 22 tenants were paying $50–$100 below market rate. Correcting this increased monthly revenue by $1,650 and annual NOI by nearly $20,000—boosting the property’s value by over $300,000 at a 6% cap rate.
Final Thought: Lease audits are the equivalent of finding money already in your pocket. They don’t require capital improvements or market appreciation—just attention to detail and execution. Don’t leave ROI on the table.
