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.
Missouri Gross up Clause in a Base Year Lease: A Comprehensive Explanation In the realm of commercial real estate leasing in Missouri, it is essential for both landlords and tenants to become familiar with the concept of a "gross up clause." Specifically, a gross up clause is a provision found in a base year lease that aims to account for and adjust the expenses associated with operating a commercial property. By doing so, it ensures that the tenant pays their fair share of expenses, even if the occupancy level of the building fluctuates. The key purpose of a gross up clause is to establish a standardized "base year" against which future operating expenses will be calculated. Typically, the base year is selected as the year in which the lease term begins. It is crucial to carefully define the base year, including the specific expenses and variables that will be encompassed within it. When it comes to Missouri, there might not necessarily be different types of gross up clauses specific to the state. However, various approaches or methodologies can be employed within the gross up clause to achieve equitable cost allocation. Let's explore a few common ones: 1. Full Building Gross up Clause: This type of clause considers the property as fully occupied, regardless of the actual occupancy rate. In this method, the landlord includes hypothetical lease agreements for any unoccupied space when determining operating expenses. By doing so, the tenant's share of expenses is not impacted by the presence or absence of vacant spaces. 2. Partial Building Gross up Clause: Unlike the full building gross up clause, a partial building approach takes into account the actual occupancy rate of the property. This method calculates the tenant's expenses based on the ratio of occupied square footage to the total rentable square footage. 3. Expense Stop Gross up Clause: Instead of using a base year for calculation, this gross up method establishes an expense stop, also known as an expense cap or threshold. Once the actual operating expenses exceed this predetermined amount, the tenant is then responsible for contributing their proportionate share. 4. Expense Pass-Through Gross up Clause: This clause allows the landlord to pass through any increase in operating expenses to the tenant. The tenant's share is recalculated annually based on the actual expenses incurred by the landlord, excluding the base year amount. It is crucial for parties involved in a base year lease agreement in Missouri to carefully negotiate and define the specific provisions within the gross up clause. Clear and concise language should be used to avoid any ambiguity or disputes in the future. In conclusion, a gross up clause within a base year lease plays a vital role in ensuring fair and equitable distribution of operating expenses. Though there might not be different types of gross up clauses specific to Missouri, the approach employed within the clause can vary, depending on the intended allocation methodology chosen by the parties involved.
