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.
Title: Understanding the Wisconsin Gross-Up Clause in an Expense Stop Stipulated Base or Office Net Lease Keywords: Wisconsin Gross-up Clause, Expense Stop, Stipulated Base, Office Net Lease Introduction: The Wisconsin Gross-Up Clause holds significant importance in Expense Stop Stipulated Base or Office Net Leases. This clause helps tenants understand and calculate their proportionate share of operating expenses and ensures fairness in cost allocations. In this article, we will delve into what the Wisconsin Gross-Up Clause entails, its importance, and examine different types commonly used in such lease agreements. 1. Understanding the Wisconsin Gross-Up Clause: The Wisconsin Gross-Up Clause is a provision included in a commercial lease agreement, specifically in an Expense Stop Stipulated Base or Office Net Lease. Its primary purpose is to allocate and distribute operating expenses fairly among tenants based on their occupied space's square footage or another predetermined criteria. 2. Importance of the Wisconsin Gross-Up Clause: — Ensures Fairness: The Wisconsin Gross-Up Clause prevents unfair cost burdens on tenants with smaller leased areas. — Cost Predictability: It allows both landlords and tenants to estimate and plan for annual operating expenses by using a standard calculation method. — Enhanced Transparency: Tenants can clearly ascertain how their share of operating expenses is determined, promoting transparent financial dealings. — Cost Control: This clause enables tenants to exert some control over their operating expenses and avoid unexpected financial burdens. 3. Types of Wisconsin Gross-Up Clauses used in Expense Stop Stipulated Base or Office Net Lease: a. Proportional Gross-Up Clause: The Proportional Gross-Up Clause determines a tenant's share of operating expenses based on the ratio of their leased area to the total leasable space. For example, if a tenant occupies 20% of the total square footage, they will be responsible for 20% of the operating expenses. b. Expense Stop Gross-Up Clause: Under this type of Wisconsin Gross-Up Clause, operating expenses are calculated up to a predetermined limit known as the "Expense Stop." Once the expenses surpass this limit, landlords are responsible for the surplus amount. c. CPI (Consumer Price Index) Gross-Up Clause: In this clause, the Wisconsin Gross-Up is determined based on changes in the Consumer Price Index, reflecting inflation or deflation. This ensures that tenants' proportional share of operating expenses remains current and reflects market trends. d. Direct Proportional Gross-Up Clause: The Direct Proportional Gross-Up Clause is similar to the Proportional Gross-Up Clause, but it explicitly excludes vacant areas from the total leasable space calculation. This prevents tenants from bearing costs associated with unoccupied spaces. Conclusion: The Wisconsin Gross-Up Clause plays a vital role in maintaining fairness and transparency in commercial lease agreements. By accurately allocating operating expenses, tenants can plan and budget their financial responsibilities effectively. Understanding the various types of Wisconsin Gross-Up Clauses, such as Proportional, Expense Stop, CPI, and Direct Proportional, is crucial for landlords and tenants to negotiate terms that align with their respective interests.
