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.
Connecticut Gross Up Clause in Base Year Lease: A Comprehensive Explanation In commercial real estate leasing, a Connecticut Gross Up Clause is a crucial component of a base year lease agreement. This clause allows landlords to adjust the base year operating expenses to reflect a certain occupancy level, ensuring a fair distribution of expenses between tenants. Moreover, the gross up clause ensures that tenants are responsible for their proportional share of expenses based on the building's anticipated occupancy rate, even if it is not fully occupied during the base year. Several types of Connecticut Gross Up Clauses can be employed in a base year lease. These include: 1. Pro Rata Gross Up Clause: Under this clause, the landlord grosses up the operating expenses by adjusting them to a predetermined occupancy rate, typically 95%. By doing so, the landlord accounts for the expenses that would have been incurred had the building reached its anticipated occupancy level. Consequently, tenants are responsible for their proportionate share of these hypothetical expenses. 2. CPI-U Gross Up Clause: Employing the Consumer Price Index for All Urban Consumers (CPI-U), this clause adjusts the base year operating expenses proportionally to changes in the index. By tracking inflation, tenants assume their proportionate share of increased expenses based on the CPI-U of the base year. 3. Threshold Gross Up Clause: In this scenario, the gross up clause only activates when a certain occupancy threshold is met. The threshold is often set at a specific percentage, such as 90% or 95% occupancy. Until the threshold is reached during the base year, tenants are responsible for their actual percentage of operating expenses. Once the threshold is attained, tenants' expenses are adjusted to reflect the anticipated occupancy level. The Connecticut Gross Up Clause provides stability in lease agreements by ensuring a fair allocation of expenses among tenants. It protects landlords from potential losses due to vacancies during the base year, while also ensuring that tenants do not shoulder the burden of unrealized operating expenses. Moreover, this clause promotes transparency and fosters trust between landlords and tenants, as both parties have a clear understanding of their financial obligations. When negotiating a base year lease in Connecticut, it is crucial to consider the implementation of a Connecticut Gross Up Clause to address possible fluctuations in operating expenses and occupancy levels. Discussing different types of clauses, such as the pro rata gross up, CPI-U gross up, or threshold gross up, allows both parties to evaluate and select the most suitable clause for their specific leasing arrangement. In summary, a Connecticut Gross Up Clause in a base year lease is designed to ensure equitable cost-sharing among tenants. By employing this clause, landlords protect themselves from excessive financial burdens resulting from under-occupied buildings during the base year, while tenants contribute their fair share of operating expenses based on the anticipated occupancy level.
