This office lease clause should be used in an expense stop, stipulated base or office net lease. When the building is not at least 95% occupied during all or a portion of any lease year, the landlord shall make an appropriate adjustment for each lease year to determine what the building operating costs. Such an adjustment shall be made by the landlord increasing the variable components of such variable costs included in the building operating costs which vary based on the level of occupancy of the building.
California Gross Up Clause: A Comprehensive Guide for Expense Stop Stipulated Base or Office Net Lease In a commercial lease, particularly for office spaces or stipulated base leases, the inclusion of a California Gross Up Clause is crucial to ensure fairness and avoid disputes between landlords and tenants. This clause is specifically designed to address situations where operating expenses exceed a specified limit, known as an expense stop, and require a gross up adjustment. In California, this clause comes in different types, each catering to specific lease requirements. Let's explore the various types of California Gross Up Clauses that should be used in an Expense Stop Stipulated Base or Office Net Lease: 1. Basic California Gross Up Clause: This type of gross up clause allows the landlord to recalibrate the tenant's expense obligations, primarily if the total operating expenses surpass the agreed-upon expense stop. The gross up formula outlines the methodology for prorating, allocating, and adjusting the tenant’s share of expenses to account for situations where vacancy or low occupancy may impact the overall expense calculations. Keywords: California gross up clause, basic gross up formula, recalibrate expense obligations, prorating and allocating expenses, expense stop. 2. Additional California Gross Up Clause Features: Apart from the basic gross up clause, additional features can be included to add more specificity and customization to the lease agreement: a. Vacancy Allowance: This type of gross up clause allows the landlord to account for vacant or unleashed areas within the overall building. The clause specifies how vacancy is factored into the operating expense calculations, ensuring that the tenant's share is not unfairly burdened due to idle spaces. It defines the percentage of vacancy that can be used to determine the grossed-up expenses. Keywords: Gross up clause with vacancy allowance, idle spaces, operating expense calculations, tenant's fair share. b. Common Area Gross Up: In office buildings or complexes with shared common areas such as lobbies, hallways, restrooms, and parking lots, a common area gross up clause is essential. It outlines how the landlord will allocate common area expenses to tenants based on their leased square footage. This clause ensures that tenants are responsible only for their proportionate share of common area costs, preventing any unfair burden on certain tenants. Keywords: Common area gross up clause, shared common areas, allocated square footage, fair cost distribution. c. Expense Stop Adjustment: This type of California Gross Up Clause focuses on adjusting the expense stop level itself. It allows for periodic revisions to the expense stop amount, considering factors such as inflation, changes in market conditions, or a property's financial performance. This clause ensures that the expense stop remains relevant and reasonable throughout the lease term, protecting the tenant from unexpected increases in operating expenses. Keywords: Expense stop adjustment, periodic revisions, inflation, market conditions, financial performance. Remember, the specific type of California Gross Up Clause to be used in an expense stop stipulated base or office net lease may vary depending on factors like the type of property, lease term, and the parties involved. Seeking legal counsel or consulting with real estate professionals experienced in commercial leasing is highly recommended ensuring the comprehensive inclusion and appropriate application of the chosen gross up clause.California Gross Up Clause: A Comprehensive Guide for Expense Stop Stipulated Base or Office Net Lease In a commercial lease, particularly for office spaces or stipulated base leases, the inclusion of a California Gross Up Clause is crucial to ensure fairness and avoid disputes between landlords and tenants. This clause is specifically designed to address situations where operating expenses exceed a specified limit, known as an expense stop, and require a gross up adjustment. In California, this clause comes in different types, each catering to specific lease requirements. Let's explore the various types of California Gross Up Clauses that should be used in an Expense Stop Stipulated Base or Office Net Lease: 1. Basic California Gross Up Clause: This type of gross up clause allows the landlord to recalibrate the tenant's expense obligations, primarily if the total operating expenses surpass the agreed-upon expense stop. The gross up formula outlines the methodology for prorating, allocating, and adjusting the tenant’s share of expenses to account for situations where vacancy or low occupancy may impact the overall expense calculations. Keywords: California gross up clause, basic gross up formula, recalibrate expense obligations, prorating and allocating expenses, expense stop. 2. Additional California Gross Up Clause Features: Apart from the basic gross up clause, additional features can be included to add more specificity and customization to the lease agreement: a. Vacancy Allowance: This type of gross up clause allows the landlord to account for vacant or unleashed areas within the overall building. The clause specifies how vacancy is factored into the operating expense calculations, ensuring that the tenant's share is not unfairly burdened due to idle spaces. It defines the percentage of vacancy that can be used to determine the grossed-up expenses. Keywords: Gross up clause with vacancy allowance, idle spaces, operating expense calculations, tenant's fair share. b. Common Area Gross Up: In office buildings or complexes with shared common areas such as lobbies, hallways, restrooms, and parking lots, a common area gross up clause is essential. It outlines how the landlord will allocate common area expenses to tenants based on their leased square footage. This clause ensures that tenants are responsible only for their proportionate share of common area costs, preventing any unfair burden on certain tenants. Keywords: Common area gross up clause, shared common areas, allocated square footage, fair cost distribution. c. Expense Stop Adjustment: This type of California Gross Up Clause focuses on adjusting the expense stop level itself. It allows for periodic revisions to the expense stop amount, considering factors such as inflation, changes in market conditions, or a property's financial performance. This clause ensures that the expense stop remains relevant and reasonable throughout the lease term, protecting the tenant from unexpected increases in operating expenses. Keywords: Expense stop adjustment, periodic revisions, inflation, market conditions, financial performance. Remember, the specific type of California Gross Up Clause to be used in an expense stop stipulated base or office net lease may vary depending on factors like the type of property, lease term, and the parties involved. Seeking legal counsel or consulting with real estate professionals experienced in commercial leasing is highly recommended ensuring the comprehensive inclusion and appropriate application of the chosen gross up clause.
