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.
Minnesota Gross Up Clause in Base Year Lease: A Detailed Description The Minnesota Gross Up Clause is a crucial provision that should be included in a base year lease agreement. This clause ensures that the landlord is fairly compensated for the operating expenses incurred during the base year, providing a balanced approach to the tenant's share of these costs. In essence, the clause helps maintain the tenant's obligation to cover a proportionate amount of expenses, even when the occupancy rate changes throughout the lease term. There are two main types of Minnesota Gross Up Clauses that can be utilized in a base year lease agreement: 1. Actual Expense Gross Up Clause: This type of gross up clause allows the landlord to adjust the operating expenses of the base year to reflect an occupancy ratio that is equal to the full occupancy, even if the building is not fully occupied during that year. This means that if the building is only 80% occupied during the base year, the landlord can "gross up" the expenses to reflect expenses as if the building were fully occupied. The tenant, in turn, will be responsible for their proportionate share of the grossed-up expenses. 2. Market Expense Gross Up Clause: This type of gross up clause permits the landlord to adjust the operating expenses of the base year to reflect market occupancy rates rather than actual occupancy rates. This clause aims to protect the landlord's revenue stream by requiring the tenant to shoulder a proportionate share of the expenses based on market occupancy rates, even if the actual occupancy rate is lower. This protects the landlord from financial losses caused by lower occupancy rates during the base year. Both types of Minnesota Gross Up Clauses serve the purpose of ensuring a fair distribution of operating expenses between the landlord and tenant. The implementation of these clauses helps maintain financial stability for the landlord and offers transparency and consistency for the tenant throughout the lease term. In conclusion, the Minnesota Gross Up Clause is a critical provision to include in a base year lease agreement. By choosing either the Actual Expense Gross Up Clause or the Market Expense Gross Up Clause, landlords can protect their financial interests and maintain a balanced allocation of operating expenses between themselves and the tenants.
