This office lease clause states the conditions under which the landlord can and can not furnish any particular item(s) of work or service which would constitute an expense to portions of the Building during the comparative year.
Title: Hawaii Clause for Grossing Up the Tenant Proportionate Share — A Comprehensive Overview Introduction: In commercial real estate leases, the Hawaii Clause for Grossing Up the Tenant Proportionate Share plays a crucial role in distributing operating expenses among tenants. This detailed description aims to provide an in-depth understanding of this clause, its significance, and various types found in Hawaii's commercial lease agreements. 1. Understanding the Hawaii Clause for Grossing Up the Tenant Proportionate Share: The Hawaii Clause for Grossing Up the Tenant Proportionate Share is a provision commonly incorporated in commercial lease agreements in the state of Hawaii. It serves to ensure fair distribution of operating expenses among tenants, accounting for variations in occupancy levels throughout the property. 2. Function and Importance of the Hawaii Clause: a) Distribution of Operating Expenses: The clause ensures that each tenant pays their fair share of operating expenses based on their proportional usage of the property. b) Fairness in Cost Allocation: It accounts for vacant spaces, preventing one tenant from bearing disproportionate expenses or subsidizing others. c) Encourages Equitable Relationships: It fosters a harmonious tenant-landlord relationship by providing transparency and fairness in cost allocation, promoting long-term lease agreements. 3. Types of Hawaii Clause for Grossing Up the Tenant Proportionate Share: a) Pro Rata Basis Gross-Up: This method applies a proportional increase to each tenant's share of expenses to account for vacancies, ensuring equitable distribution. For instance, if the building is 80% occupied, each tenant's share is adjusted upwards to account for the remaining 20%. b) Budgeted Gross-Up: In this type, operating expenses are estimated in advance, with various provisions included to account for potential variations. It allows the landlord to estimate expenses more accurately while safeguarding against unexpected fluctuations. c) CPI Gross-Up: This approach employs the Consumer Price Index (CPI) to adjust the tenants' proportionate shares annually. By compensating for inflation, tenants are shielded from rising costs while maintaining equitable distribution. 4. Legal Considerations and Compliance: a) Consult an Attorney: It is advisable for both parties, tenants, and landlords, to seek legal counsel while drafting or reviewing lease agreements incorporating the Hawaii Clause. b) Compliance with State Laws: Ensure the Hawaii Clause adheres to specific state laws and regulations governing commercial leases within the state. c) Review Frequency: Establish how frequently the Hawaii Clause and the Tenant Proportionate Share are subjected to review, ensuring timely adjustments and financial transparency. Conclusion: The Hawaii Clause for Grossing Up the Tenant Proportionate Share is a significant provision in commercial real estate leases that ensures fair distribution of operating expenses among tenants. Understanding the different types of Hawaii Clause, including the Pro Rata Basis Gross-Up, Budgeted Gross-Up, and CPI Gross-Up, is crucial for both tenants and landlords. By implementing this clause while complying with legal obligations, businesses in Hawaii can foster equitable relationships and sustainable leasing arrangements.
