This office lease form describes an operating cost escalations provision.In the event that the operating costs for any calendar year during the term of this lease shall be greater than the base operating costs, the tenant will pay to the landlord additional rent of an amount equal to such an increase.
The New Mexico Operating Cost Escalations Provision is a legal provision included in commercial lease agreements to account for potential increases in operating costs associated with the property being leased. This provision ensures that both the landlord and the tenant fairly share the burden of any rising operating expenses during the lease term. To deliver a comprehensive understanding, the provision can be classified into two types: Base Year Escalation and Consumer Price Index (CPI) Escalation. 1. Base Year Escalation: The Base Year Escalation type of New Mexico Operating Cost Escalations Provision calculates the tenant's responsibility for operating cost increases based on a specified base year. The base year is typically the year in which the lease agreement was initiated or a predetermined reference year chosen by the parties involved. The provision stipulates that the tenant will be responsible for any operating cost escalation above the base year's level. This type ensures that the tenant pays their fair share of increases occurring beyond the base year. Keywords: New Mexico Operating Cost Escalations Provision, base year, operating costs, commercial lease, lease agreement, operating expenses, base year escalation, fair share, tenant responsibility. 2. Consumer Price Index (CPI) Escalation: Under the Consumer Price Index (CPI) Escalation type of New Mexico Operating Cost Escalations Provision, the tenant's responsibility for increasing operating costs is determined by changes in the Consumer Price Index. The provision sets a specific CPI formula to determine adjustments in operating costs during the lease term. The CPI is an essential economic indicator that measures changes in the prices of a basket of goods and services over time. By using the CPI, this provision ensures that the tenant's rent accurately reflects the prevailing economic conditions and adjusts accordingly to maintain fair cost-sharing. Keywords: New Mexico Operating Cost Escalations Provision, Consumer Price Index (CPI), operating costs, lease term, changes, economic conditions, rent, fair cost-sharing, provision formula. In conclusion, the New Mexico Operating Cost Escalations Provision is a crucial part of commercial lease agreements that addresses the potential for rising operating costs. By understanding its two types, Base Year Escalation and Consumer Price Index Escalation, both landlords and tenants can ensure a fair and balanced approach to sharing any increased operating expenses.
