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.
Utah Gross Up Clause: A Detailed Description of its Importance in a Base Year Lease In the realm of commercial real estate leasing, a gross up clause plays a significant role in determining a fair and equitable distribution of operating expenses among tenants. Particularly in Utah, understanding the nuances of a gross up clause in a base year lease is crucial. This detailed description aims to unravel the essential aspects of the Utah gross up clause and shed light on different types that can be applied in a base year lease. 1. Definition and Purpose: The Utah gross up clause refers to a provision within a lease agreement that allows landlords to "gross up" the operating expenses of a building in order to account for the hypothetical occupancy level of a building. It aims to establish a standardized base year expense structure, enabling fair and equitable allocation of such expenses for tenants, regardless of occupancy levels. 2. Base Year Lease: The base year lease serves as the foundation for calculating operating expenses in the subsequent years of the lease term. It represents a specific year during the lease agreement that acts as a comparative benchmark for calculating the share of operating expenses the tenant is responsible for. 3. Different Types of Utah Gross Up Clauses for Base Year Lease: a) Flat Gross Up Clause: This type of gross up clause involves proportionately increasing the operating expenses of the base year, assuming 100% occupancy, regardless of the actual occupancy level. It calculates any variation in occupancy levels in other years by including a corresponding expense increase. b) Variable Gross Up Clause: Unlike the flat gross up clause, a variable gross up clause takes into consideration the actual occupancy level of the building when calculating operating expenses for subsequent years. Expenses are adjusted relative to the actual occupancy levels, resulting in a more accurate distribution of expenses among tenants. c) Expense Pooling Gross Up Clause: This type of clause allows the landlord to pool together the operating expenses of multiple tenants in a building, creating a collective expense pool. The expenses are then grossed up based on the collective occupancy level, ensuring a fair distribution among all tenants. d) Pro rata Common Area Gross Up Clause: In cases where a lease involves common area expenses, this type of gross up clause is used. It ensures that all tenants, regardless of their base year occupancy level, contribute proportionately to the common area expenses based on their leased space. e) Specific Expense Gross Up Clause: This clause allows landlords to gross up specific expenses that may vary based on occupancy levels. For example, utility costs can be grossed up to reflect the hypothetical usage if the building was fully occupied. Understanding and implementing the appropriate gross up clause in a base year lease is crucial for both landlords and tenants. It ensures fair allocation of operating expenses while accommodating potential variations in occupancy levels. By utilizing the different types of gross up clauses available, landlords can tailor the calculation method based on the unique characteristics of their property and lease agreement.
