What is the operating expense ratio?

Expressed as a percentage, the operating expense ratio is your total operating expense (excluding interest), minus depreciation, divided by gross income. Why it's important. The normal operating expense ratio range is typically between 60% to 80%, and the lower it is, the better.

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Gross up Clause that Should be Used in an Expense Stop Stipulated...

Orange California Gross up Clause that Should be Used in an Expense Stop Stipulated Base or Office Net Lease

Name: Orange California Gross up Clause that Should be Used in an Expense Stop Stipulated Base or Office Net Lease
Brand: US Legal Forms
Rating: 4.82 (206 reviews)

Category:

Landlord Tenant - Commercial Leases

State:

Multi-State

County:

Orange

Control #:

US-OL19034IB

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Instant download

Description

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.

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'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.

An "Expense Stop" provision in a lease: a) Puts a limit on the amount of building operating expenses the tenant must pay.

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.

Gross rent is the opposite of net rent and is the amount a tenant pays under a gross lease. It includes the cost of the outgoings. Its advantageous for tenants at times because it caps the amount payable and therefore ensures no surprise costs arising.

Many commercial leases, especially office leases, include a provision that allows landlords to gross up operating expenses. That is, if the building is not fully occupied, the landlord is empowered to gross up or overstate the expenses as if the building is fully occupied (or nearly full).

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.

Gross leases are commonly used for commercial properties, such as office buildings and retail spaces. Modified leases and fully service leases are the two types of gross leases. Gross leases are different from net leases, which require the tenant to pay one or more of the costs associated with the property.

Expressed as a percentage, the operating expense ratio is your total operating expense (excluding interest), minus depreciation, divided by gross income. Why it's important. The normal operating expense ratio range is typically between 60% to 80%, and the lower it is, the better.

An expense stop is a contractual provision that protects the property owner from rising expenses over the lease term. In such a case, the property owner typically agrees to pay all of the operating expenses in the first year of the lease, this is known as the base year amount and it sets the expense stop.

Upon lease commencement, the building owner will agree to pay the tenant's first year expenses (a.k.a. base year expenses) and will continue to pay the same amount in each of the subsequent years while the tenant will pay any additional costs above the amount realized in the base year.

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Zinc. EZ 2. A certificate of insurance covering a nonresidential real property. 1. Zinc, Deposits, and Insurance. F. What is the current law regarding the use of zoning exemptions at nonresidential properties for business purposes? The Uniform Residential Code of Washington (URL) allows the use of zoning exemptions at nonresidential properties for commercial and nonresidential purposes for residential uses. Exemptions for business use must meet the following requirements: A. Commercial Uses. Business use is defined as the use described in Section 11.07.020(13).

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Orange California Gross up Clause that Should be Used in an Expense Stop Stipulated Base or Office Net Lease

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