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.
Title: Understanding the Arkansas Gross Up Clause for a Base Year Lease: Types and Detailed Description Introduction: When entering into a commercial lease agreement, particularly a base year lease, it is important to consider the Arkansas gross up clause. This clause ensures fair distribution of expenses among tenants in a multi-tenant building. In this article, we will provide a detailed description of the Arkansas gross up clause and explore different types that should be used in a base year lease, focusing on relevant keywords such as Arkansas, gross up clause, base year lease, expenses, and fair distribution. 1. Definition and Purpose of the Arkansas Gross Up Clause: The Arkansas gross up clause is a provision included in a commercial lease agreement that aims to allocate expenses proportionately among tenants based on their leased square footage. It allows for adjustments to be made to account for vacant or partially occupied spaces, ensuring a fair distribution of costs and preventing an unfair burden on full-paying tenants. 2. Types of Arkansas Gross Up Clause in a Base Year Lease: a) Actual Expense Gross Up: This type of gross up clause allows for the adjustment of expenses based on the actual occupancy level of the property during the base year. The expenses are recalculated and divided by the occupied square footage, assuming 100% occupancy. This method ensures a fair sharing of costs when there are vacancies or underutilized areas. b) Market Standard Gross Up: In this type of gross up clause, expenses are grossed up to account for 100% occupancy, regardless of the actual occupancy level. It assumes that the property is fully occupied, aiming to provide a consistent methodology in calculating expenses throughout the lease term. c) Actual Expense with Cap Gross Up: This type of gross up clause combines elements of both the actual expense and market standard methods. It allows for an adjustment of expenses based on the actual occupancy level during the base year, up to a specified cap. The cap ensures that expenses are not disproportionately passed on to tenants in the case of extremely low occupancy levels. d) Direct Expense Billed vs. Gross Expense Billed Gross Up: This type of gross up clause differentiates between direct expenses, which are billed separately to individual tenants (e.g., utilities, janitorial services), and gross expenses, which are common area expenses shared among all tenants. Each type of expense may be treated differently in terms of grossing-up calculations, offering flexibility in allocating costs. Conclusion: In summary, the Arkansas gross up clause is a crucial provision in a base year lease agreement that ensures fair distribution of expenses among tenants. Understanding the different types of gross up clauses, such as actual expense gross up, market standard gross up, actual expense with cap gross up, and direct expense billed vs. gross expense billed gross up, allows for the appropriate selection based on the unique characteristics of the commercial lease. By incorporating the Arkansas gross up clause into a base year lease, property owners and tenants can establish a transparent and equitable system for expense allocation, fostering a mutually beneficial leasing environment.
