Understanding Leases
PeopleSoft Lease Administration is an integrated solution that effectively manages the entire life cycle of equipment and corporate real estate leases, from lease execution and financial processing through lease expiration and termination.
A lease is an agreement between a lessee and a lessor that defines the terms of the rental. The lease is the basis for invoices or vouchers and receipts or payments. You create a lease to enable processing for an invoice or payment for recurring rent and operating expenses for that lease.
You can process everything from a single invoice or payment to the most complex recurring invoices or payments as required by the lease. You can perform cost allocations, rent escalations, and capacity planning for your organization, and establish critical date alerts to notify you when you must take action on or make a decision about a particular lease.
Before you create a lease, you must determine the type. There are two types of leases: payables leases and receivables leases. Your role—lessee or lessor —determines the type of lease that you create.
This section discusses:
Payables leases.
Receivables leases.
Payables leases enable a tenant (lessee) to manage and report on rent, operating expenses, and miscellaneous rents. Lease classification can be tested to determine if a lease should be treated as capital/finance or operating. You can set up recurring payment schedules to facilitate the lease. You can set up percent rent terms based on sales reported by tenant. You can capture specific lease clauses and lease options, and set up critical date alerts for important events related to the lease, such as lease expiration. You can also audit operating expenses, comparing with previous years to ensure continuity of spending. Select the View Audit Log action on the General Information page to view the search audit logs page, where users can review the audit log information for the leases.
Note: View Audit logs action is displayed only when at least one lease audit log event is enabled on the Enable Audit Logging page (Set Up Financials/ Supply Chain, Common Definitions, Audit Logging, Enable Audit Logging).
You create a payables lease when your organization is the tenant (or lessee) and you are issuing rent payments to a landlord (or lessor) for space or equipment that you are using. You enter the lease terms from your signed lease agreement as a payables lease and set it up for payment processing through PeopleSoft Payables. As a result, the majority of your transactions are payables transactions or payments that you are issuing through PeopleSoft Payables to be paid to your lessor.
When you enter the lease, you can establish recurring rent payments that the system processes on a periodic basis of your choosing. When processing rent payments, the system generates transactions with PeopleSoft Payables as the transaction destination. Even manual payments, which include ad-hoc entries, security deposits, operating expense audits, and percent rent sales reports, can be sent through PeopleSoft Payables with their associated accounting ChartFields, as determined by the transaction routing code and accounting rule setup. You can also send through PeopleSoft Payables (first as a negative reversal entry of the originating transaction and then as a new entry for the revised payment amount) any adjustment entries caused by changes in security deposits, operating expense audit adjustments, or percent rent sales reports.
Paybles leases allow you to capture clause-specific user-defined fields, notes, attachments, and supplemental data.
For payables leases, the integration points to consider for processing are PeopleSoft General Ledger (for straightline accounting), Payables, and Asset Management (for the Asset Repository). Since PeopleSoft Billing integration is not needed for payables leases, any adjustment transactions are sent through PeopleSoft Payables as negative voucher entries.
See Transaction Routing Codes Page.
See Understanding PeopleSoft Lease Administration Accounting Rules.
Corporate lease administration sometimes requires landlord billing capabilities for leasing owned property and subleasing leased property. Accounting for all costs and lease income associated with lease management is critical to a landlord (lessor). Receivables leases enable you to collect rent, manage your expenditures, and allocate them proportionately to the departments or other entities.
When you create a receivables lease, you set up recurring invoices that generate automatically in the frequency defined in the lease. You can track lease clauses and options, and set up critical dates to remind you of important events related to the lease, such as lease expiration. You can also set up simple to complex rent terms, track percent rent schedules, and upload percent rent sales reports to determine the percent increase to bill for monthly rent.
You create a receivables lease when your organization is the landlord (or lessor) and you are submitting rent bills to a tenant (or lessee). For a receivables lease, you enter the lease terms from your signed lease agreements and set up the terms for processing as the landlord. As a result, the majority of your transactions are billing transactions or bills that you are issuing through PeopleSoft Billing to your tenant.
When entering the lease, you can establish recurring rent bills that the system processes on a periodic basis of your choosing. When processing rent invoices, the system generates transactions with PeopleSoft Billing as the transaction destination. Even manual bills, which include ad hoc entries, security deposits, operating expense reconciliations, and percent rent sales reports, are sent through PeopleSoft Billing with their associated accounting ChartFields, as determined by the transaction routing code and accounting rule setup. You can also send through PeopleSoft Billing (first as a negative reversal entry of the originating transaction and then as a new entry for the revised payment amount) any adjustment entries caused by changes in security deposits, operating expense audit adjustments, or percent rent sales reports.
Security deposit refund processing, which is available on receivables lease processing (outside of the lease component) can potentially divert the security deposit refund to PeopleSoft Payables if, during lease expiration, the refund has not been depleted by sufficient deductions to cover the remaining amount outstanding and money is owed back to the tenant.
Receivables leases also allow you to capture clause-specific user-defined fields, notes, attachments, and supplemental data.
For Receivables leases, the integration points to consider for processing are PeopleSoft General Ledger (for straightline accounting), Billing, and Asset Management (for the Asset Repository). Although, for the most part, any adjustment transactions are sent through PeopleSoft Billing as negative invoice lines, a PeopleSoft Payables integration is also available (and potentially necessary) to handle security deposit refund processing during lease expiration.
See Understanding Transaction Routing Codes.
See Understanding PeopleSoft Lease Administration Accounting Rules.
The high-level business process flow for creating a lease consists of these steps:
Define the general lease information.
Enter the lease timetable and lease administration information.
Add the property information.
Define the financial terms of a lease.
Add base rent.
Add the operating expenses.
Add miscellaneous rent.
Allocate total lease payments across assets (multi-asset leases).
Define percent rent information.
Enter security deposits.
Add lease clauses.
Establish options and set critical dates.
Add and attach pertinent notes.
Define internal and external contacts for the lease.
Validate and activate lease.
See Establishing Operating Expenses for a Lease, Setting Up Percent Rent Terms, Setting Up Security Deposits, Setting Up Options and Critical Dates, Understanding Lease Administration Contacts.