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.
Montana Gross Up Clause: A Detailed Description and Types for Base Year Lease The Montana Gross Up Clause is an essential component of a Base Year Lease agreement, ensuring fairness and accuracy in rent calculations when operating expenses increase over time. It prevents tenants from bearing the burden of additional costs arising from an increase in property expenses during the lease term. This clause serves to protect both landlords and tenants by providing a clear framework for adjusting the base rent in case of rising operating expenses. The key purpose of the Montana Gross Up Clause is to adjust the base year expenses based on the current year's operating expenses, maintaining a consistent level of occupancy costs throughout the lease term. It establishes a fair methodology for determining additional costs that the tenant needs to cover when operating expenses exceed the base year expenses. There are primarily two types of Montana Gross Up Clauses that can be used in a Base Year Lease: 1. Proportional Gross Up Clause: This type of clause determines the incremental expenses by proportionally distributing the increase in operating expenses among all tenants based on their leased square footage. It considers the ratio of the tenant's leased space to the total leasable area in the building. The formula used may be (Tenant's Leased Space ÷ Total Leasable Area) × Incremental Expenses = Tenant's Additional Cost. 2. Tenant's Share Gross Up Clause: Under this clause, the incremental expenses are distributed among tenants based on their share of the total building expenses. Each tenant's contribution is determined by multiplying their percentage share of the total expense by the incremental expenses. The formula used may be (Tenant's Share of Total Expenses ÷ 100) × Incremental Expenses = Tenant's Additional Cost. Both types of Montana Gross Up Clauses have their advantages and applicability depending on the lease structure and the premises' characteristics. Landlords and tenants should carefully consider which clause to incorporate into their Base Year Lease based on factors such as the building's size, tenant mix, and desired fairness in cost allocation. In conclusion, the Montana Gross Up Clause is a crucial element in a Base Year Lease agreement. By providing a systematic method for adjusting the base rent, it ensures that tenants are protected from excessive increases in operating expenses during the term of the lease. Whether using a Proportional Gross Up Clause or a Tenant's Share Gross Up Clause, careful consideration and understanding of these clauses are vital to creating a fair and equitable lease agreement.
