Data Uncovered: Audits the key to avoid expensive inaccuracy

Data audits of both larger and smaller investors by proptech company NTrust reveal an average of about 25% inaccuracy on property and lease data and as much as 40% of the inaccuracies are critical information such as dates and rent amounts.

“So that has a huge impact: missing critical events, having the wrong rent paid or received from your tenants, is potentially costing a huge amount of money,” said Martin Betts, NTrust’s vice president commercial real estate EMEA.

“This is only on the data that they’ have actually captured, we’re not even looking at the data that they haven’t captured.”

Inaccurate recurring billing details can either lose an investor money or mean that tenants are being overcharged. “And that will come back to bite,” he told Real Asset Insight’s Richard Betts.

“But again, more importantly, by missing a critical date where that’s a break, potentially you can’t move that tenant out and that is going to cost a huge amount of money so if you’re unaware of the data you’re utilising you aren’t going to make the correct decisions.”

Similarly, service charge records are requently wrong. “We’ve done a huge number of service charge audits and on an average of one in three leases, service charges are incorrectly set up.”

Across the board, $10,000 per annum per lease is being under-recovered. “So it’s a significant amount of money which at some point would have to be recovered from the tenant,” he said.

Occupiers also frequently hold inaccurate information about their real estate.

“We’ve done a large amount of service charge audits with the global occupiers. Over the last three years, on average, across just five individual corporate occupiers we have seen that they have been overcharged $27 million in those three years. We’ve audited tenants over a 10-year period too. One tenant was charged over $20 million and we have evidenced that so they can go back to their individual landlords to recoup that $20 million.

Betts said that while NTrust has done a significant number of audits of both leases and service charges but as a percentage of the market it is still small.

“So, it is a hidden issue because no one is really aware what their data is actually telling them,” he said

Betts said that trusting data is a mistake but frequent audits can alleviate the problem. “What we would suggest is to audit elements of your data – it doesn’t have to be everything, maybe the lease, maybe the service charge – on a six-monthly basis, and that will highlight smaller problems which are easily solved,

The problem is a huge opportunity for third parties. “If they’re advising or managing that client’s property then they have the ability to put forward audits to push that agenda to say ‘we want this data to be correct, we want you to gain the benefit of actually having 100% accurate data’, so it’s a real opportunity for the third party to push it with their clients.”

He said that a common issue is that where the master data comes from different sources they may become misaligned perhaps in terms of floor areas or updated rent figures.

“Getting that initially set up is important, so auditing it from the outset, but the six-monthly or quarterly audits keep them in line,” Martin Betts said.

“It’s an easy problem to solve and can be solved monthly or quarterly. It’s really cost effective and it’s a really easy solution which the investor or the occupier can easily take up at any given time.”

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