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 Washington Gross Up Clause in Base Year Leases: Types and Application Introduction: In Washington, the Gross Up Clause plays a crucial role in commercial leases, particularly in base year leases. This detailed description aims to delve into what exactly the Washington Gross Up Clause entails, its significance, and the different types of gross up clauses applicable in base year leases. Key Points: 1. What is the Washington Gross Up Clause? The Washington Gross Up Clause is a provision in commercial base year leases designed to account for changes in operating expenses, taxes, and other costs incurred by landlords and passed on to tenants. Its purpose is to ensure fair distribution of expenses occurring beyond the base year. 2. Importance of the Washington Gross Up Clause: • Fair Allocation of Expenses: With fluctuating operating costs, the gross up clause ensures that tenants are not burdened with an unfair share of expenses, balancing the financial burden between landlords and tenants. • Clarity and Transparency: Including this clause brings transparency by outlining clear procedures for adjusting expenses, eliminating potential disputes between parties. 3. Types of Washington Gross Up Clause: The Washington Gross Up Clause can be categorized into the following types, each serving different purposes: a) Expense Stop Gross Up Clause: This type of gross up clause requires landlords to apply a percentage increase to the base year expenses to account for any excess operating expenses incurred. It ensures tenants pay their fair share without bearing unforeseen fluctuations. b) Ratchet Gross Up Clause: With a ratchet gross up clause, landlords can "ratchet up" the expenses from the base year or the previous year if they exceed a certain percentage. Here, tenants will bear only the increased costs beyond the predetermined limit, safeguarding against excessive expense fluctuations. c) Pro Rata Gross Up Clause: Under this type of gross up clause, landlords spread the increased expenses proportionally amongst tenants based on their leased area. This method ensures equitable distribution of costs as each tenant is responsible for their rightful share, avoiding undue financial burdens. Conclusion: In conclusion, Washington Gross Up Clauses in base year leases provide a mechanism for adjusting expenses, enabling a fair distribution of financial burdens between landlords and tenants. Understanding the various types of gross up clauses associated with base year leases further ensures transparency and avoids any discrepancy in expense allocation. To ensure a mutually beneficial lease agreement, tenants and landlords in Washington should consider including the appropriate type of gross up clause that aligns with their specific needs and circumstances.
