Guest Post by Sara Stanley, MCR, Managing Director, Commercial Tenant Services, Inc.

An arm’s length transaction refers to a transaction in which the parties involved are independent and act in their own self-interest. They have no special relationship with each other that could influence their decisions, such as family ties, close friendship, or business connections. The term “arm’s length” implies that the transaction is conducted as if the parties were strangers to each other, ensuring fairness and transparency.  

Arm’s length transactions are critical as they establish a benchmark for reasonable costs for value provided: 

1. Business Transactions: When companies buy or sell goods and services to each other at arm’s length, the prices are typically based on market rates rather than preferential rates. 
2. Legal Contracts: Contracts between parties are expected to be at arm’s length to ensure that each party negotiates freely and without undue influence. 

Arm’s length transactions are crucial for ensuring fairness, avoiding conflicts of interest, and maintaining integrity in distinct types of transactions and agreements. 

Whether a charge is billed on an arm’s length pricing basis may not be obvious. A deep dive Lease Audit is often the only way to identify Landlords using related-parties and recover the most money back to your company. Most Stand-alone Lease Audit companies recover millions of dollars in savings in this specific area alone. Uncovering these overcharges often requires insight and a thorough investigation. . . and with experience working on the landlord side of the equation. Reach out to a Lease Auditor today, one who only works for tenants.

Sara Stanley, MCR, is Managing Director at Commercial Tenant Services, Inc.