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.
A New York Gross Up Clause is a crucial component in a lease agreement, specifically in a stipulated base or office net lease with an expense stop. In this detailed description, we will explore the significance of a Gross Up Clause in New York real estate leases and discuss the different types that can be used to protect both landlords and tenants. Keywords: New York Gross Up Clause, stipulated base, office net lease, expense stop, real estate leases, landlord, tenant 1. Introduction to New York Gross Up Clause: In New York real estate leases, a Gross Up Clause addresses the issue of additional expenses incurred by landlords due to vacant space or unoccupied areas in a building. It enables a fair allocation of costs between landlords and tenants based on occupancy levels. 2. Importance of Gross Up Clause in Expense Stop Stipulated Base or Office Net Lease: When a lease agreement includes an expense stop, it means that the tenant is responsible for covering expenses up to a certain limit, beyond which the landlord assumes the costs. The Gross Up Clause ensures that the expenses eligible for tenant reimbursement are adjusted to reflect a fully occupied building. This prevents the tenant from subsidizing costs that should be borne by the landlord. 3. Types of Gross Up Clauses for Expense Stop Stipulated Base or Office Net Lease: a. Pro Rata Share Gross Up Clause: The most common type of New York Gross Up Clause, the Pro Rata Share method calculates a tenant's share of expenses based on their allocated square footage compared to the total rentable area of the building. This method ensures fairness as tenants only pay for their proportionate share of expenses, even if the building is not fully leased. b. Expense Stop Gross Up Clause: This type of Gross Up Clause sets a specific expense stop limit, beyond which the landlord assumes all additional costs. It protects the tenant from unexpected increases in expenses, but the clause should clearly define the types of expenses covered and how they are calculated. c. Market Expense Gross Up Clause: In a market expense Gross Up Clause, the reimbursement amount is determined by comparing the actual expenses in the base year to the average expenses of comparable buildings in the market. This method safeguards the tenant from potential overpayment if the building's expenses are higher than the market average. d. Exclusive Control Gross Up Clause: Exclusive Control Gross Up Clause is applicable when the tenant occupies the entire building. It ensures that the tenant is not responsible for expenses related to areas under exclusive landlord control, such as common areas or vacant floors. This clause protects the tenant from excessive charges while maintaining fairness. 4. Conclusion: New York Gross Up Clauses play a vital role in expense stop stipulated base or office net leases. By selecting the appropriate type of Gross Up Clause, both landlords and tenants can ensure a fair allocation of expenses while protecting their respective interests. Whether it's the Pro Rata Share, Expense Stop, Market Expense, or Exclusive Control Gross Up Clause, including a well-defined Gross Up provision in the lease agreement is essential in maintaining transparency and avoiding potential financial disputes.
