What is a stipulated operating budget?

A stipulated operating budget of real property is a document that contains essential financial information for a future property owner, and even a mortgage lender on a commercial property.  Such budgets are most often created during the commercial foreclosure proceedings, and include profit and loss statements.   

Most stipulated operating budgets include: 

• Tax data – information about tax rates, tax assessed values, monthly/annual tax bills, and how much taxes have increased should be included in stipulated operating budgets.  This information helps future commercial property owners budget how much taxes are likely to cost them over time.

• Monthly operating expenses – the typically monthly costs associated with the property are included in this budget.  This will include mortgage payments, insurance costs, tax bills, utilities, maintenance fees, salaries and dues paid on a monthly basis, etc.

• Annual operating expenses – not all of the costs associated with managing a property come on a monthly basis.  The stipulated operating budget should include annual dues and fees as well.

• Recurring or common issues – if the current owners of a property are having trouble collecting rent from tenants, or having consistent repair and maintenance problems associated with the property, this should be disclosed in full on a stipulated operating budget, as it is critical in the assessment of the profitability of the property.

An experienced lawyer can help you to either prepare or review a stipulated operating budget to ensure everything is done properly and that things go smoothly.