A Puerto Rico Clause for Grossing Up the Tenant Proportionate Share refers to a provision commonly found in commercial lease agreements in Puerto Rico. This clause outlines the methods and conditions under which the tenant's proportionate share of operating expenses will be adjusted or "grossed up" to account for any increase in real estate taxes during the lease term. The purpose of this clause is to protect the tenant from unexpected costs resulting from an increase in property taxes. It ensures that the tenant's proportionate share of operating expenses remains consistent despite any fluctuations in tax rates. By including this clause, both landlords and tenants can have a clear understanding of their financial responsibilities throughout the lease agreement. There are different types of Puerto Rico Clause for Grossing Up the Tenant Proportionate Share that can be implemented based on the lease negotiation. These types include: 1. Fixed Increase: This type involves a predetermined fixed percentage increase in the tenant's proportionate share of operating expenses each year. For example, if the property taxes increase by 5%, the tenant's share automatically increases by the same percentage. 2. CPI Adjustment: With this type of clause, the tenant's proportionate share of operating expenses is adjusted based on the Consumer Price Index (CPI). If the CPI increases by a certain percentage, the tenant's share is proportionally adjusted accordingly. 3. Negotiated Increase: In some cases, the lease agreement may allow for a negotiated increase in the tenant's proportionate share of operating expenses. This type of clause gives the parties involved the flexibility to reach an agreement on an acceptable increase based on market conditions and other factors. It's important for both landlords and tenants to carefully review and negotiate the specific terms of the Puerto Rico Clause for Grossing Up the Tenant Proportionate Share to ensure fairness and clarity. It is recommended to consult with legal professionals or real estate experts familiar with Puerto Rico's leasing laws to ensure that the clause accurately reflects the intended intentions and protects both parties' interests.
Para su conveniencia, debajo del texto en español le brindamos la versión completa de este formulario en inglés. For your convenience, the complete English version of this form is attached below the Spanish version.Puerto Rico Cláusula para aumentar la parte proporcional del arrendatario - Clause for Grossing Up the Tenant Proportionate Share
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How to fill out Puerto Rico Cláusula Para Aumentar La Parte Proporcional Del Arrendatario?
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Also known as tenant's pro rata share. The portion of a building occupied by the tenant expressed as a percentage. When a tenant is responsible for paying its proportionate share of the landlord's costs for the building, such as operating expenses and real estate taxes, the tenant pays this amount over a base year.
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).
It is a contract between a landlord and tenant, wherein the lessee, in exchange for the exclusive use of a piece of property, agrees to pay the lessor a fixed sum of money for a certain period of time that encompasses rent and all costs associated with ownership, such as taxes, insurance, and utilities.
Correctly drafted, a gross up provision relates only to Operating Expenses that ?vary with occupancy??so called ?variable? expenses. Variable expenses are those expenses that will go up or down depending on the number of tenants in the Building, such as utilities, trash removal, management fees and janitorial services.
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.
Gross-ups are also practical for tenants. A prime example is a lease with a base year or expense stop. If a tenant negotiates a base year, then, in most cases, the tenant will pay its share each year of the operating expenses which exceed the base year's expenses.
Grossing Up is a process for calculating a tenant's share of a building's variable operating expenses, where the expenses are increased for expense recovery purposes, or Grossed Up, to what they would be if the building's occupancy remained at a specific level, typically 95%- 100%.
