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.
Title: Understanding the Essential Elements of Nevada Gross Up Clause for Base Year Leases Introduction: In commercial leases, a Nevada Gross Up Clause serves as an essential provision that allows for the equitable allocation of operating expenses among tenants. This article will delve into the intricacies of Nevada Gross Up Clause, examining its significance, its application in base year leases, and different variations. 1. What is a Nevada Gross Up Clause? A Nevada Gross Up Clause in a commercial lease is a provision that requires the landlord to estimate and adjust the operating expenses to reflect a specified level of occupancy, referred to as the "base year." It ensures fairness by distributing expenses proportionally to the tenancy level during the base year. 2. Understanding Nevada Gross Up Clause in a Base Year Lease: A Base Year Lease is a commercial lease agreement where the tenant's share of operating expenses is determined based on a specified base year. The Nevada Gross Up Clause in such leases serves to correct the expenses to what they would have been if the building had been fully occupied during the baseline period. 3. Key Elements of a Nevada Gross Up Clause: a. Occupancy Level: It defines the occupancy percentage used as a baseline for grossing up the operating expenses. b. Reconciliation Process: It outlines the procedure for adjusting operating expenses to reflect the desired level of occupancy. c. Calculation Method: It specifies the calculation method used to determine the grossed-up expenses, such as an applied factor or a mathematical formula. d. Timeframe: It states the period to which the base year expenses are compared and adjusted. 4. Types of Nevada Gross Up Clause for Base Year Leases: a. Fully Defeasible Method: This method requires the landlord to adjust the operating expenses as if the building were fully occupied, irrespective of the actual occupancy level during the base year. b. Partially Defeasible Method: This method allows the landlord to gross up the expenses based on a predetermined occupancy percentage, reflecting the actual occupancy level during the base year. c. Dynamic Gross Up Method: This method permits the landlord to adjust the expenses periodically over the lease term, reflecting changes in the occupancy level year by year. Conclusion: A well-drafted Nevada Gross Up Clause in a Base Year Lease serves as a vital mechanism for fairly distributing operating expenses among tenants. By understanding the different types and elements of this provision, both landlords and tenants can establish transparency and avoid potential disputes related to operating expense allocations.
