This office lease clause states the conditions under which the landlord can and can not furnish any particular item(s) of work or service which would constitute an expense to portions of the Building during the comparative year.
Clause for Grossing Up the Tenant Proportionate Share
Category:
State:
Multi-State
Control #:
US-OL709
Format:
Word;
PDF
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Description
Definition and meaning
The clause for grossing up the tenant proportionate share is a legal provision commonly included in commercial lease agreements. It ensures that tenants contribute to shared expenses in a fair manner, even if certain areas of a property are unoccupied or undergoing construction. This clause assesses the tenant's share of operating costs based on the assumption that all spaces are fully used, thus generating equitable cost distribution.
Key components of the form
A well-drafted clause for grossing up the tenant proportionate share includes several essential components:
- Definition of shared expenses: Clearly outlines what constitutes shared expenses, such as maintenance, utilities, and property taxes.
- Calculation method: Specifies how the expenses will be calculated if some areas are not used or leased.
- Adjustment provisions: Details provisions for adjusting the calculations based on occupancy rates or construction activities.
- Tenant responsibilities: Clarifies the tenant's obligations regarding payment of the grossed-up expenses.
Who should use this form
This form is ideal for landlords and property managers who want to establish clear guidelines on expense sharing with tenants in commercial leases. It is particularly beneficial in properties with multiple tenants where occupancy rates may fluctuate. Additionally, tenants looking to understand their financial responsibilities in a lease should find this form helpful.
Benefits of using this form online
Utilizing the clause for grossing up the tenant proportionate share online offers several advantages:
- Accessibility: Users can easily access and download the form from anywhere.
- Convenience: The online process simplifies filling out and sharing the document without the need for physical copies.
- Updates: Online forms can be regularly updated to reflect current laws and best practices, ensuring compliance.
- Time-saving: Users can complete the form at their own pace, reducing the pressures often associated with in-person consultations.
Common mistakes to avoid when using this form
When completing the clause for grossing up the tenant proportionate share, be mindful of the following common pitfalls:
- Overlooking definitions: Ensure that all terms related to expenses are clearly defined to avoid misunderstandings.
- Inaccurate calculations: Double-check all calculations to ensure fair distribution of costs.
- Vagueness in terms: Use precise language to avoid ambiguity regarding tenant responsibilities.
- Failing to communicate changes: Keep all tenants informed of any changes to their responsibilities as outlined in the clause.
How to fill out Clause For Grossing Up The Tenant Proportionate Share?
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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. In a new lease, the Base Year is most often the year the lease is executed or the year in which the lease commences.
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.
In general, the tenant's proportionate share is determined by taking the building's rentable square footage and dividing it by the tenant's rentable square footage.
AR usually indicates arrears (behind in rent). Base Rent AR seems to indicate 2 months' of rent in arrears. Retro may mean rent previous to the current month (money owed previously). This could be late fees or other fees owed.
Many commercial leases contain a gross-up provision to amplify the property's operating expenses to the amount of operating expenses that would be incurred if the building was fully occupied.This authorizes the landlord to restate the operating expenses as if the building was completely occupied for one year.
Correctly drafted, a gross up provision relates only to Operating Expenses that vary with occupancyso called variable expenses. Variable expenses are those expenses that will go up or down depending on the number of tenants in the Building, such as utilities, trash removal, management fees and janitorial services.
The amount of rent that gets paid as operating costs might be called additional rent or TMI (taxes, maintenance and insurance).
A gross-up is an additional amount of money added to a payment to cover the income taxes the recipient will owe on the payment.For example, a company may agree to pay an executive's relocation expenses plus a gross-up to offset the expected income taxes that will be owed on the salary payment.
Add up all federal, state, and local tax rates. Subtract the total tax rates from the number 1. 1 tax = net percent. Divide the net payment by the net percent. net payment / net percent = gross payment. Check your answer by calculating gross payment to net payment.
