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.
Phoenix Arizona Gross up Clause in Expense Stop Stipulated Base or Office Net Lease A Gross-up Clause in an Expense Stop Stipulated Base or Office Net Lease is a crucial provision that addresses the fair allocation of operating expenses, especially in scenarios where expenses exceed a predetermined stop or minimum amount. In the vibrant city of Phoenix, Arizona, where commercial leasing is a significant aspect of the real estate market, understanding the Gross-up Clause and its variations is essential for both landlords and tenants. The Gross-up Clause serves to ensure that tenants are not burdened with disproportionate expenses when the building's operating costs exceed a specified limit, commonly referred to as the "Expense Stop." This provision is crucial as it helps distribute the additional costs among all occupancy units fairly. By including this clause in a lease agreement, both landlords and tenants can mitigate unexpected and excessive financial burdens. Various types of Phoenix Arizona Gross-up Clauses that can be included in an Expense Stop Stipulated Base or Office Net Lease are: 1. Proportional Gross Up Clause: Under this clause, the landlord is responsible for proportionately allocating excessive operating expenses to tenants in relation to their leased area size or percentage of total leased space. This ensures that each tenant bears expenses in proportion to their occupancy, offering a fair and equitable arrangement. 2. Expense Per Rentable Square Foot Gross Up Clause: This type of Gross-up Clause allocates expenses based on the ratio of each tenant's rented space to the total rentable area of the building. By utilizing this approach, landlords can distribute costs accurately and transparently, reflecting each tenant's share of the overall leased area. 3. Permitted Gross Up Clause: A Permitted Gross-up Clause entitles the landlord to recover all potential or foreseeable expenses that may arise during the lease term, regardless of whether they surpass the Expense Stop. This type of clause puts the onus on the tenant to cover all additional costs, ensuring the landlord is protected from unexpected expenses that may arise during the lease period. It is essential for both landlords and tenants to consult legal professionals specializing in real estate law when structuring a Gross-up Clause within an expense stop stipulated base or office net lease. These professionals will ensure that the clause is tailored to meet the unique requirements of the lease agreement while accounting for the specific laws and regulations governing commercial leasing in Phoenix, Arizona. Overall, the Phoenix Arizona Gross-up Clause in an expense stop stipulated base or office net lease plays a pivotal role in maintaining fairness and transparency when dealing with operating expenses. By including a well-crafted Gross-up Clause, landlords and tenants can effectively manage unexpected financial burdens and foster a healthy and sustainable landlord-tenant relationship in the Phoenix commercial real estate market.
