Today's Tenant Rep Tuesday Tip topic: What does "Base Year" Mean in a Commercial Lease?
Landlords pass along operating expenses (e.g. taxes, insurance, maintenance) as part of a full service “base year” lease.
How it works... if a landlord quoted you $21 per square foot…….a certain percentage of that amount consists of the operating expenses. The first year a tenant occupies office space the base year is set. So at the end of the lease year the landlord reconciles the books and determines what the actual operating expenses are per square foot.
Let's break it down... at the end of the year the actual operating expenses were $9 per square foot - that becomes the Base Year. At the end of each and every consecutive year the landlord will reconcile their operating expenses. If the operating expenses exceed $9 per square foot, the landlord sends the tenant a separate bill to pay for the overages. If the operating expenses remain at $9 per square foot or under the tenant does not pay or owe anything.
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