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.
The Michigan Gross Up Clause in a Base Year Lease is an important provision that should be included to ensure fairness and accuracy in calculating the tenant's share of operating expenses. This clause deals with the adjustment of expenses in a lease that are subject to change, such as property taxes, insurance, and common area maintenance costs. The purpose of the Michigan Gross Up Clause is to account for changes in the building's occupancy level and expenses over time. It is particularly crucial in multi-tenant buildings where vacancies can affect the overall expense allocation. There are several types of Michigan Gross Up Clauses that can be utilized in a Base Year Lease: 1. Straight-Line Gross Up Clause: Under this provision, the landlord calculates the expense adjustment based on a fixed occupancy rate. For example, if the building's occupancy rate is 75%, expenses that would have been incurred if the building were fully occupied are proportionately added to the tenant's share. 2. Expense Comparison Gross Up Clause: This type of clause compares the current year's expenses with the expenses of a predetermined base year. The tenant's share of expenses is then adjusted based on any changes. 3. Market Rent Gross Up Clause: In this scenario, the gross up is based on the market rental rate rather than the actual occupancy rate. It ensures that the tenant pays their fair share of expenses, as if the building were fully leased at market rates. 4. Budget-Based Gross Up Clause: This clause allows the landlord to estimate future expenses based on an approved budget. The tenant's share is calculated using the estimated expenses for the applicable fiscal period. 5. Prorate Gross Up Clause: This provision divides the expenses equally among all the tenants based on their respective square footage. It simplifies the calculation process, ensuring fairness for tenants with varied occupancy rates. In conclusion, incorporating a Michigan Gross Up Clause in a Base Year Lease is crucial to accurately determine a tenant's share of operating expenses. The specific type of clause to be used will depend on the circumstances and preferences of the landlord and tenant. It is advisable to consult with legal professionals familiar with Michigan real estate laws to ensure that the chosen gross up clause aligns with applicable regulations and serves the best interests of both parties involved.
