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Gross up Clause that Should be Used in a Base Year Lease

Dallas Texas Gross up Clause that Should be Used in a Base Year Lease

Name: Dallas Texas Gross up Clause that Should be Used in a Base Year Lease
Brand: US Legal Forms
Rating: 4.8 (495 reviews)

Category:

Landlord Tenant - Commercial Leases

State:

Multi-State

County:

Dallas

Control #:

US-OL19034IA

Format:

Instant download

Description

This office lease clause should be used in a base year lease. This form states that 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 in accordance with industry standards of the building operating costs. This amount shall be deemed to be the amount of building operating costs for the year.

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FAQ

The first step is to multiply the variable portion of the expenses ($850,000 66.67%) resulting in a subtotal of $566,667. Next, the fixed expenses of $150,000 are added to the subtotal bringing the total expense pool to $716,667. Now assume the expense reimbursement is has a base amount of $100,000.

- Gross lease (sometimes referred to as fully gross). With a Net lease, a tenant is responsible for rent, plus all outgoings in addition to this rent. In the case of the Gross lease, all outgoings are included in the rent.

Gross-Up Example Let's use the hypothetical example of a building that has $1,000,000 in expenses. 85% of those expenses are variable and 15% fixed. The building is 2/3 occupied (66.67%). The first step is to multiply the variable portion of the expenses ($850,000 66.67%) resulting in a subtotal of $566,667.

That's why the gross-up clause often will take any occupancy below 95% as if the building were 95% occupied (or fully occupied, as the lease may read). In our example, the one tenant occupying 50% of the building would pay $95,000 (representing the 95%) while the landlord would absorb the remaining $5,000.

In a typical gross-up scenario, the level to which a landlord may artificially increase variable expenses due to a gross-up clause is 95% or 100% (also known as full occupancy).

'Make good' refers to the clause/s in a lease that set out how a tenant should leave a property at the end of the lease term. Basically, when the day comes to hand back the keys to the landlord, the property should be in the condition that is stipulated in the lease.

up is an additional amount of money added to a payment to cover the income taxes the recipient will owe on the payment. Grossing up is most often done for onetime payments, such as reimbursements for relocation expenses or bonuses. Grossing up can also be used to game executive compensation.

So, what is a gross-up provision? Simply stated, the concept of gross up provision stipulates that if a building has significant vacancy, the landlord can estimate what the variable operating expense would have been had the building been fully occupied, and charge the tenants their pro-rata share of that cost.

Commercial leases will often have a provision in the lease that permits the landlord to gross up, or overstate the variable operating expenses of the property to the level of operating expenses that would have been incurred had the building been fully occupied for the year.

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A gross lease is a legal documents between a tenant and landlord under a flat rent amount. Suppose the operating expenses are tied to the base year rent.Our systems are used in the offshore production of crude oil and natural gas.

Dallas Texas Gross up Clause that Should be Used in a Base Year Lease

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How do you calculate a gross-up on a lease?

What is a gross plus lease?

How do you calculate a gross-up real estate?

What is the 95% gross-up lease?

What is a 95% gross-up?

What is a make good clause in a lease?

What does it mean to gross-up expenses?

How does gross-up clause work?

What is a gross-up clause in a lease?

Interesting Questions

What is a gross up clause in a base year lease?

Why would a landlord include a gross up clause in a lease?

How does a gross up clause work?

What happens if the building's occupancy rate is below the gross up threshold?

Does a gross up clause affect the tenant's rent?

Can a tenant negotiate the terms of a gross up clause?

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