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 Louisiana Gross Up Clause: Enhancing Expense Stops in Base or Office Net Leases Introduction: In the realm of commercial leasing, the Gross Up Clause holds particular importance when it comes to determining shared expenses between landlords and tenants. This article aims to provide a detailed understanding of the Louisiana Gross Up Clause that should be utilized in an Expense Stop Stipulated Base or Office Net Lease. We will explore various types of Gross Up Clauses commonly used in Louisiana and their relevance in ensuring equitable expense allocation. 1. What is a Gross Up Clause? A Gross Up Clause is typically included in a lease agreement to account for additional costs incurred by the landlord when a building is not fully occupied. It is designed to share and allocate such expenses among tenants, diminishing the burden on individual lessees. Specifically, a Louisiana-centric Gross Up Clause is essential to protect the interests of both landlords and tenants in expense stops pertaining to Base or Office Net Leases. 2. Types of Louisiana Gross Up Clauses: 2.1 Tiered Expense Gross Up Clause: This type of Gross Up Clause provides for a tiered adjustment mechanism. It allocates expenses based on the percentage of the leased space occupied by a tenant. For example, if a tenant occupies 50% of the space, they would only be responsible for 50% of the grossed-up expenses. 2.2 Pro Rata Gross Up Clause: The Pro Rata Gross Up Clause distributes expenses proportionally among all tenants in the building, regardless of the space they occupy. Under this arrangement, each tenant pays a share of expenses calculated based on their leased area's proportional value. 2.3 Market Share Gross Up Clause: The Market Share Gross Up Clause determines expense calculations by considering a tenant's market share in relation to other tenants. This type of clause accounts for any disparity in occupancy rates and enables a more equitable distribution of costs. 3. Importance of Louisiana Gross Up Clauses: 3.1 Fair Expense Allocation: By implementing a Louisiana Gross Up Clause, leases can establish a fair system for sharing expenses. Tenants are protected from bearing an excessive financial burden when the building is not fully leased. 3.2 Encourages Rental Efficiency: The Gross Up Clause encourages landlords to actively seek new tenants, ensuring healthier occupancy rates. This, in turn, reduces the likelihood of expenses falling solely on existing tenants. 3.3 Avoiding Financial Surprises: Clear and concise Gross Up Clauses assist tenants in understanding their financial obligations upfront, minimizing any unexpected financial liabilities throughout the lease term. Conclusion: In a Louisiana Expense Stop Stipulated Base or Office Net Lease, the Gross Up Clause is a crucial component. By incorporating appropriate Gross Up Clause provisions, landlords and tenants can achieve equitable expense allocation, enhance rental efficiency, and minimize financial uncertainties. Whether it's a Tiered Expense, Pro Rata, or Market Share Gross Up Clause, careful consideration of the chosen clause in line with lease specifics will pave the way for a successful commercial leasing experience in Louisiana.
