Encyclopedia
Audit right
A lease clause letting the tenant review the landlord's records behind operating cost charges, usually within a set time after the reconciliation.
For example: A tenant whose additional rent jumped asks, within the time the lease allows, to see the invoices behind the landlord's statement. (Illustration only, not a real deal.)
This is a general industry term with no single official definition. Your lease or contract wording controls.
Example only, not a real client. Say your share of operating costs jumps one year. Your lease gives you a right to review the landlord’s records. You find a capital repair was charged incorrectly, and the landlord issues a credit.
What I’d tell a friend
Ask for an audit or review right in your lease, and use it if costs look wrong.
Why it matters to you
Without it, you have to take the landlord's year-end numbers on faith. With it, you can check the charges and recover mistakes, which on a long lease can be real money.
How to use it in your deal
Tenants should check the lease for audit rights: how long after the year-end statement you can audit, how much notice is needed, who can do the audit, and who pays if errors are found. Often, the landlord pays audit costs if the overcharge exceeds a set threshold. Keep track of the deadline, since many leases make statements final if not challenged in time.
Look at how costs are shared, whether excluded costs like capital repairs or leasing commissions are charged, and whether management fees are calculated correctly. Landlords should keep clear records and explain allocations. Buyers should check whether tenants have outstanding disputes or audits.
Ask for gross-up calculations if the building isn't fully occupied. Start with a polite request for the general ledger and invoices; many questions get answered without a formal audit. If you hire an auditor, check that the lease doesn't ban contingency-fee auditors, which some do. Keep your findings factual and ask for a credit, not an apology.
Mistakes I see
Missing the audit deadline. Not checking exclusions. Ignoring allocation methods.
In BC and Vancouver
Lease terms govern; the Commercial Tenancy Act applies.
Official sources: Commercial Tenancy Act (BC Laws)
What it means
An audit right lets a tenant review the landlord’s records of operating costs and taxes charged to tenants.
Leases set out how and when the review can happen.
What to check
Look at the time limits for raising disputes and who pays for the audit.
Keep your statements and compare them year to year. Raise questions in writing within the time allowed.
Questions to ask before you sign
- How long do I have to audit?
- Who pays?
- What costs are excluded?
- How are costs allocated?
What makes an audit right usable
An audit right on operating costs is hollow if the window is tiny, you must be in default-free status on impossible terms, or the lease excludes the categories you care about. Tenants want enough time, access to statements, and a cost-shifting rule if the landlord was wrong by more than a stated margin.
Landlords with percentage rent want a matching right to audit sales. Both sides should keep the right practical.
Ask your lawyer to read the audit clause beside the operating-cost definition.
Keep reading
Related terms: Additional rent, Operating costs, common area maintenance (CAM)
- Leasing out commercial space in BC: a landlord's guide
- Leasing commercial space in BC: a tenant's guide
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General information for British Columbia only. It isn’t legal, tax, accounting or financial advice, laws and rates change, and reading it doesn’t make you my client. Any numbers or scenarios are hypothetical. Check the linked official source and talk to a lawyer, accountant or other qualified professional before you act or sign anything. See the terms and disclaimer.