Changeover Contract for Partial RO

[Former Member]

Hi Gurus,

How do we treat contract and rental object for tenant changeover in partial RO ?

Assume we have two years contract with tenant A for RO X 1000 m2. RERAPP full amount have been done at first month. RERAALCN also has run in every month. After several months, there is changeover tenant A to tenant B for only 400 m2 of RO X and for the rest (600 m2) is still rented by tenant A.

With tenant B we do not bill rental charges anymore because tenant A has paid us 2 years rental charges for total spaces.

Please, I need your input, is there any best practices to handle this case?

Thank you,

Budi

[amarendar · Accepted solution]

Hi Budi,

I will first speak about SAP best practice.

When you are converting a 1000 m2 rental object into two RO of 600m2 & 400m2 respectively, the RO with 1000 m2 no longer exists. And any contract for that RO should be closed immediately in system. Create two separate contracts for the newly created RO.

This is how it should be handled in REFX.

If you do not want to discontinue the contract, then it has to be separately handled in FI.

You have to start invoicing Tenant B for 400m2 for the rest of the period of contract with reference to contract. This will be done in FI. (Either create a recurring entry or every month a manual accounting entry).

With the same amount, what you are invoicing to Tenant B, you have to create a debit memo to tenant A for the rest of the period of contract.

I wish I could have given a better solution to it.

Regards,

Amar

[Former Member · Accepted solution]

Hi Amar,

First, thank you for your response.

By the way, about your idea to create another ROs and contracts, how about the accrual/deferral journal from the first contract? If I discontinue the contract, as far I know, sap will recognize the rest of revenue. On other side, 2 new contracts will generate AR and revenue again.

It's not my requirement. I don't want to change AR and also revenue.

Regards,

Budi

[amarendar · Accepted solution]

Hi Budi,

Then you have to adjust it manually in finance. Let system do what it is doing in REFX, you may follow my suggestion of passing accounting entry.

Regards,

Amar

[Former Member]

Hi Budi,

You can try as described below..

1. Change the area in Rental space-1 (Created with area 1000 m2), maintain measurement as 600 m2 with validity.

For example the tenant A surrendered 400 m2 on 01.04.2016, the measurements must be as below

From 00.00.0000 to 31.03.2016 - 1000 m2

From 01.04.2016 to                     - 600 m2

2. Create another rental space-2 with object validity 01.04.2016 and maintain measurement 400 m2

3. Create Contract on Tenant B with object Rental space-2, don't add any condition types so that only rental space-2 will be occupied without any cash flow.

In case if you are using Object cash flow (distribution postings) and distribution parameter is 'Object measurement', then i think you have to adjust through CO entries (Object to Object i.e. Rental space-1 to Rental space-2).

Rgds,

Srini

[Former Member]

Dear Srini,

If I follow this step, how about the first contract during accrual/deferral process for the rest period? Should I do an FI manual posting ?

Thank you,

Budi

[Former Member]

Hi Budi,

Accrual/Deferral for rest of the period will be similar to earlier process. I don't think it will impact REFX process, no need to do any Financial postings.

As mentioned in my earlier mail, if you are following the distribution in Contracts then you may need to post CO entries to tally Object level revenues.

Rgds,

Srini