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.
Rhode Island Gross up Clause that Should be Used in a Base Year Lease
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FAQ
The Base Year is a year that is tied to the actual amount of expenses for property taxes, insurance and operating expenses (sometimes called CAM) to run the property in a specified year.
So, what is a gross-up provision? Simply stated, the concept of ?gross up provision? stipulates that if a building has significant vacancy, the landlord can estimate what the variable operating expense would have been had the building been fully occupied, and charge the tenants their pro-rata share of that cost.
All operating expenses, including property taxes, property insurance, utilities, and common area maintenance, are paid for by the landlord?hence the name, full-service lease. The landlord uses the tenant's base rate rental payment, or 'base year', to pay for operating expenses for the first year.
A Base Year clause is found in many Full-Service and Gross Leases. It is not found in triple net leases. The Base Year clause is a year that is tied to the actual amount of expenses for property taxes, insurance and operating expenses (sometimes called CAM) to run the property in a specified year.
Modified gross leases are rental agreements where the tenant pays base rent at the lease's inception as well as a proportional share of other costs like utilities. A gross lease is where the landlord pays for operating expenses, while a net lease means the tenant takes on the property expenses.
Gross-ups are also practical for tenants. A prime example is a lease with a base year or expense stop. If a tenant negotiates a base year, then, in most cases, the tenant will pay its share each year of the operating expenses which exceed the base year's expenses.
In a modified gross or full-service lease, the landlord has you covered and will pay the operating expenses incurred for the first calendar year?or base year?of the lease. Then, your business starts paying its pro-rata share the next year.
Every modified gross lease is unique to the landlord and the building. Some expenses will be covered and included as part of the base rental rate and the base year expenses, while the remaining expenses are passed through on a pro rata share and reconciled annually.
