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

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US-OL19034IA
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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.

In the context of commercial real estate leases, an Arizona gross up clause is a crucial provision that should be included in a base year lease. This clause ensures that the tenant is not burdened with the variable operating expenses associated with the property beyond the base year. The gross up clause is intended to protect tenants from unexpected increases in operating expenses, such as maintenance, repairs, insurance, and taxes. The purpose of an Arizona gross up clause is to establish a fair distribution of operating expenses between the landlord and the tenant. It ensures that the tenant's responsibility for these expenses is proportional to their occupancy during the base year, rather than being affected by any changes in expenses in subsequent years. There are two main types of Arizona gross up clauses that can be used in a base year lease: 1. Expense Stop Gross Up Clause: This type of gross up clause limits the tenant's obligation to pay the increase in operating expenses up to a certain predetermined "expense stop" amount. Any increase in expenses beyond this amount is solely the responsibility of the landlord. 2. Proportional Share Gross Up Clause: This type of gross up clause calculates the tenant's share of operating expenses based on their proportional occupancy of the property during the base year. This ensures that the tenant's share remains constant, regardless of any fluctuations in total expenses. Both types of Arizona gross up clauses provide protection to tenants, but the choice between them depends on the negotiating power of the parties involved and their preferences regarding expense allocation. In conclusion, an Arizona gross up clause is an essential component of a base year lease that safeguards tenants from unexpected increases in operating expenses. By including this clause in the lease agreement, tenants can ensure a fair distribution of expenses and protect themselves from financial surprises.

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FAQ

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.

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.

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%.

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.

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.

To deal with operating expenses when a building is not at full occupancy, a landlord can incorporate a ?gross-up? provision in the lease. This allows the landlord to estimate the variable operating expenses as if the building were at 95%-100% occupancy.

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Specifically, the gross-up provision is important for a tenant that pays operating expenses based on a base year amount. After the landlord and tenant agree on ... 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 ...Discover how the Gross Up Provision in a commercial lease is designed to protect landlords and remain fair to tenants, how it's calculated, and more. The easiest way to edit Gross up Clause that Should be Used in an Expense Stop Stipulated Base or Office Net Lease in PDF format online. Form edit decoration. Suppose that a building is not fully occupied in the base year and base year operating expenses are not “grossed up.” If the building's occupancy subsequently ... May 19, 2022 — The gross-up provision ensures that the tenants cover any operating ... Second, if operating expenses are based on a base year, the gross-up ... Aug 18, 2020 — The tenants with the low base year (no gross-up provision) leases will end up paying a larger portion of those operating expenses based on ... May 4, 2021 — With a gross lease, the base year should reflect the cost of normal building operations, but in cases where 2020 was the base year, there may be ... Mar 17, 2023 — A Full Service Gross Lease with Base Year refers to a commercial lease where the lessor is accountable for settling all expenditures related ... Apr 24, 2001 — Some leases require tenants to pay their share of operating expenses in excess of the operating expenses for the facility during a base year.

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