This office lease clause should be used in an expense stop, stipulated base or office net lease. 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 for each lease year to determine what the building operating costs. Such an adjustment shall be made by the landlord increasing the variable components of such variable costs included in the building operating costs which vary based on the level of occupancy of the building.
Nebraska Gross Up Clause: A Comprehensive Explanation for Expense Stop Stipulated Base or Office Net Lease The Nebraska Gross Up Clause refers to a provision incorporated into commercial leases, specifically in the context of expense stop stipulated base or office net leases, which allows landlords to "gross up" expenses to reflect a fully leased building or property. This clause ensures that tenants pay their fair share of expenses associated with the property's operation, even if the building is not fully occupied. To understand the intricacies of the Nebraska Gross Up Clause, it is essential to examine its different types and implications. 1. Basic Gross Up Clause: This is the most commonly used type of gross up clause. It entails adjusting expenses, such as real estate taxes, insurance, and common area maintenance (CAM) charges, to reflect a hypothetical 100% occupancy rate. By doing so, tenants are effectively contributing their proportionate share of expenses, irrespective of the actual occupancy levels in the building. Landlords often utilize this clause to account for vacancies and ensure all operating costs are adequately covered. 2. Gross Up Calculations: It is crucial to discern the method employed for grossing up expenses. There are generally two methods utilized in the Nebraska Gross Up Clause: a. National Base Year: In this method, the landlord selects a specific year as the base year for calculating expenses. The expenses incurred throughout that year are multiplied by the occupancy percentage, resulting in grossed-up expenses for subsequent years. This method accounts for fluctuations in expenses due to inflationary changes and provides a standardized approach. b. Fiscal Year Gross Up: Here, the landlord determines the occupancy rate on a fiscal year basis, such as monthly or quarterly. The cumulative expenses for the period are divided by the percentage of occupancy, thereby achieving the grossed-up amount per tenant. This method is ideal for tracking expenses more frequently and adapting to changing occupancy rates. 3. Expense Stop: An expense stop represents a predetermined limit that shifts the responsibility of additional expenses from the landlord to the tenant. When the tenant's contribution exceeds this predetermined expense stop, they may become liable for additional costs. The Nebraska Gross Up Clause ensures that tenants are not burdened with excessive expenses beyond this limit. Consequently, the landlord must accurately determine and communicate this expense stop to maintain transparency and avoid potential disputes. 4. Lease Negotiation: Parties involved in the lease negotiation process should pay close attention to the language and specifications within the Nebraska Gross Up Clause. It is crucial to clearly define the methods utilized for expense grossing up, the selected base year, and any applicable expense stop thresholds. By doing so, both landlord and tenant can protect their interests and align their expectations regarding expenses. 5. Legal Considerations: As with any lease clause, legal implications must be thoroughly analyzed. The Nebraska Gross Up Clause should adhere to state laws and regulations concerning commercial lease agreements. Engaging legal counsel to review and advise on the specific language employed within this clause is advisable to ensure compliance with relevant statutes. In conclusion, the Nebraska Gross Up Clause plays a vital role in expense stop stipulated base or office net leases, ensuring tenants contribute their fair share of expenses regardless of building occupancy. Examining the different types of gross up provisions, calculation methods, expense stops, and legal considerations, landlords and tenants can effectively navigate this clause, facilitating transparency and harmony in the leasing process.
