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.
Title: Understanding the Delaware Gross Up Clause in an Expense Stop Stipulated Base or Office Net Lease Introduction: In commercial leasing, particularly when dealing with expense allocation and reimbursement mechanisms, the Delaware Gross Up Clause plays a crucial role. This clause effectively ensures fair and equitable distribution of expenses between the landlord and tenant of a property. In this article, we will explore the concept of the Delaware Gross Up Clause and describe its different types that can be utilized in an Expense Stop Stipulated Base or Office Net Lease. 1. Delaware Gross Up Clause: The Delaware Gross Up Clause is a provision frequently included in commercial leases to adjust and allocate various property-related expenses fairly between the landlord and tenant. It ensures that the tenant's responsibility for expenses is consistent regardless of changes in occupancy levels or other factors. 2. Types of Delaware Gross Up Clauses: a) Tiered Gross Up Clause: The Tiered Gross Up Clause establishes different levels or tiers of expense reimbursement based on the occupancy level of the property. This clause allows for adjustments in expenses based on the percentage of tenant occupancy, ensuring that the tenant is not solely responsible for the entire expense burden when the occupancy level is low. b) Expense Stop Gross Up Clause: Under the Expense Stop Gross Up Clause, the tenant is typically responsible for paying their share of expenses up to a predetermined threshold, known as the "expense stop." Beyond this point, the landlord assumes any additional increase in expenses. The clause usually allows the landlord to incorporate future expenses into the expense stop calculation, ensuring consistent allocation over the lease term. c) CPI-U Gross Up Clause: The CPI-U (Consumer Price Index-Urban) Gross Up Clause links the tenant's expense reimbursements to changes in the CPI-U index. This type of gross up clause enables adjustments to be made annually or periodically in accordance with the inflation rate, maintaining fairness in expense allocation. d) Direct Expense Gross Up Clause: The Direct Expense Gross Up Clause allows the landlord to increase the tenant's share of expenses directly based on the level of occupancy in the building or property. This clause ensures that the tenant's expense is directly proportionate to their occupancy level rather than the overall expenses of the property. Conclusion: The Delaware Gross Up Clause serves as a vital mechanism to establish fairness and equity concerning the allocation of expenses between the landlord and tenant in a commercial lease. By selecting the appropriate type of gross up clause, such as the Tiered Gross Up Clause, Expense Stop Gross Up Clause, CPI-U Gross Up Clause, or Direct Expense Gross Up Clause, both parties can ensure the allocation of expenses is accurately reflected and adjusted according to relevant factors. It is crucial for landlords and tenants to carefully consider and negotiate the terms of the Delaware Gross Up Clause to foster a transparent and balanced leasing agreement.Title: Understanding the Delaware Gross Up Clause in an Expense Stop Stipulated Base or Office Net Lease Introduction: In commercial leasing, particularly when dealing with expense allocation and reimbursement mechanisms, the Delaware Gross Up Clause plays a crucial role. This clause effectively ensures fair and equitable distribution of expenses between the landlord and tenant of a property. In this article, we will explore the concept of the Delaware Gross Up Clause and describe its different types that can be utilized in an Expense Stop Stipulated Base or Office Net Lease. 1. Delaware Gross Up Clause: The Delaware Gross Up Clause is a provision frequently included in commercial leases to adjust and allocate various property-related expenses fairly between the landlord and tenant. It ensures that the tenant's responsibility for expenses is consistent regardless of changes in occupancy levels or other factors. 2. Types of Delaware Gross Up Clauses: a) Tiered Gross Up Clause: The Tiered Gross Up Clause establishes different levels or tiers of expense reimbursement based on the occupancy level of the property. This clause allows for adjustments in expenses based on the percentage of tenant occupancy, ensuring that the tenant is not solely responsible for the entire expense burden when the occupancy level is low. b) Expense Stop Gross Up Clause: Under the Expense Stop Gross Up Clause, the tenant is typically responsible for paying their share of expenses up to a predetermined threshold, known as the "expense stop." Beyond this point, the landlord assumes any additional increase in expenses. The clause usually allows the landlord to incorporate future expenses into the expense stop calculation, ensuring consistent allocation over the lease term. c) CPI-U Gross Up Clause: The CPI-U (Consumer Price Index-Urban) Gross Up Clause links the tenant's expense reimbursements to changes in the CPI-U index. This type of gross up clause enables adjustments to be made annually or periodically in accordance with the inflation rate, maintaining fairness in expense allocation. d) Direct Expense Gross Up Clause: The Direct Expense Gross Up Clause allows the landlord to increase the tenant's share of expenses directly based on the level of occupancy in the building or property. This clause ensures that the tenant's expense is directly proportionate to their occupancy level rather than the overall expenses of the property. Conclusion: The Delaware Gross Up Clause serves as a vital mechanism to establish fairness and equity concerning the allocation of expenses between the landlord and tenant in a commercial lease. By selecting the appropriate type of gross up clause, such as the Tiered Gross Up Clause, Expense Stop Gross Up Clause, CPI-U Gross Up Clause, or Direct Expense Gross Up Clause, both parties can ensure the allocation of expenses is accurately reflected and adjusted according to relevant factors. It is crucial for landlords and tenants to carefully consider and negotiate the terms of the Delaware Gross Up Clause to foster a transparent and balanced leasing agreement.
