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.
The Kentucky Gross Up Clause is an important provision that should be included in an Expense Stop Stipulated Base or Office Net Lease agreement. This clause ensures that the tenant does not bear the full burden of escalating operating expenses, such as property taxes, insurance premiums, and common area maintenance charges. There are generally two types of Kentucky Gross Up Clauses that can be used in an Expense Stop Stipulated Base or Office Net Lease: 1. Proportional Gross Up: Under this type of clause, the landlord agrees to calculate the operating expenses based on a hypothetical occupancy rate or square footage occupied by the tenant. This means that if the tenant's occupancy rate or square footage is less than the hypothetical rate, the landlord would gross up the expenses to reflect a higher occupancy rate. For example, if the tenant occupies 80% of the leased space, the landlord would gross up the expenses to reflect 100% occupancy, thus preventing the tenant from paying a disproportionate share of the expenses. 2. Expense Pooling Gross Up: This type of Kentucky Gross Up Clause allows the landlord to combine the expenses of multiple tenants and gross them up collectively. By pooling the expenses, the landlord can distribute operating costs evenly among all the tenants in the leased property. This method ensures fairness and prevents any single tenant from shouldering an unfair burden. Including a Kentucky Gross Up Clause in an Expense Stop Stipulated Base or Office Net Lease is crucial for both tenants and landlords. It promotes transparency, prevents any unexpected financial burdens, and ensures a fair allocation of operating expenses based on occupancy rates or pooling mechanisms. By using relevant terms such as Kentucky Gross Up Clause, Expense Stop Stipulated Base Lease, Office Net Lease, and their variations, both parties can protect their financial interests and maintain a mutually beneficial lease agreement.
