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.
Georgia Gross up Clause that Should be Used in an Expense Stop Stipulated Base or Office Net Lease
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Defining ?Gross Up? In reality, the ?grossing up? of operating expenses is a fair and necessary mechanism to ensure that the intended reimbursement is fully paid and, in some circumstances, to protect the tenant from overpaying operating expenses.
In a full service gross lease, the tenant pays a base rental rate, and landlord is typically responsible for paying any additional expenses (such as CAM fees), except for those that go above a specific amount, called an expense stop.
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.
The portion of expenses above the expense stop that are passed through to the tenant are commonly referred to as ?Recaptured? or ?Recovered? expenses.
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.
up is an additional amount of money added to a payment to cover the income taxes the recipient will owe on the payment. Grossing up is most often done for onetime payments, such as reimbursements for relocation expenses or bonuses.
Triple net lease/?NNN? lease A triple net lease is the opposite of a gross lease. The lessee agrees to pay rent, utilities, and all of the property's operating expenses. This includes maintenance costs such as common area maintenance (CAM), insurance, and property taxes (represented by ?NNN?).
An expense stop is the maximum amount a landlord will spend on operating expenses. Any amount above the expensive stop becomes the tenant's responsibility.
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.
Under a gross lease, the owner/landlord covers all the property's operating expenses including real estate taxes, property insurance, structural and exterior maintenance and repairs, common area maintenance and repairs, unit maintenance and repairs, utilities, and janitorial costs.
