Significance of Lease Abstraction
The complexities of commercial transactions are growing day by day, requiring commercial leases to cover umpteen scenarios. Mostly, commercial leases contain long wordy paragraphs written in convoluted legal language, making it difficult for a lay person to understand. Lease abstraction provides a condensed version of the actual lease, in which all the basic lease provisions are laid out in an easily understood manner.
Lease abstracting is an important part of due diligence before a merger, acquisition, or assignment and paves way for effective decision-making. During due diligence, it allows a potential buyer, investor, or a finance company to easily analyze a property. Review of lease abstracts, rather than the lease itself, makes the due diligence process time and cost-efficient. Owners of commercial real estate or landlords can prepare lease abstracts well in advance of offering a property for sale to help provide information to potential buyers. These abstracts also help lease administrators, agents, or property managers to quickly review frequently referenced lease information without needing to read through the whole document. Organizing and compiling critical lease information, such as expiration dates and option notice dates, allows for better management of lease portfolios. A lease abstract is typically required for financing purposes. When compared to the complexity of commercial property transactions, lease abstraction has evolved proportionately. It is a powerful tool that will make otherwise tedious and mundane tasks simple and efficient. However, it should be artfully drafted in a manner that allows the user to decipher the lease provisions without having to go through the entire lease.