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 Texas Gross Up Clause, also known as the Texas Gross-Up Provision, is an essential component of an expense stop stipulated base or office net lease agreement. This clause is designed to ensure that tenants are not burdened with unexpected operating expenses and to maintain an equitable distribution of expenses among all tenants in the building. The purpose of the Texas Gross Up Clause is to protect tenants from significant increases in the operating expenses of the property. It requires the landlord to calculate a hypothetical amount that would bring the expenses to a predetermined level or "grossed-up" amount. This amount is intended to reflect the expenses that would have been incurred if the property were fully occupied or at a standard level of ongoing operations. The Texas Gross Up Clause is particularly crucial in expense stop stipulated base leases, where tenants are responsible for their portion of the property expenses up to a predetermined limit, known as the expense stop. It ensures that even if the expenses exceed this limit, tenants are protected from a disproportionate share of the additional costs. There are different types of Texas Gross Up Clauses that can be incorporated into an expense stop stipulated base or office net lease agreement, depending on the specific needs and circumstances of the parties involved. Some variations of the clause include: 1. Full Gross-Up Clause: This type of clause requires the landlord to calculate the expenses as if the property were fully occupied, regardless of its actual occupancy level. It ensures that tenants are not unfairly burdened with increased expenses due to vacancies or low occupancy rates. 2. Partial Gross-Up Clause: In this case, the landlord is only required to gross up the expenses to a certain percentage of the property's full occupancy level. For example, if the clause specifies a 90% occupancy gross-up, the expenses will be calculated as if the property were at 90% occupancy, even if it is currently lower. 3. Variable Gross-Up Clause: This clause allows for the gross-up amount to vary depending on the occupancy level of the property. It can be structured in a way that provides more flexibility to both the landlord and the tenant, adjusting the expenses based on the actual occupancy rate. Ultimately, the specific type of Texas Gross Up Clause used in an expense stop stipulated base or office net lease will depend on the negotiations and agreement reached between the landlord and tenant. However, all variations of this clause aim to protect the tenant from unexpected expense increases and maintain fairness in the allocation of costs.
