A reference year - typically the first year of the lease or year of building occupancy - used in gross leases to establish a baseline for operating expenses. Tenants pay only increases above the base year's actual costs in subsequent years.
In a modified gross or gross lease with a base year stop, the landlord pays all operating expenses up to the base year level; the tenant pays their pro-rata share of any increase above that level. The base year amount is typically the actual expenses incurred in the specified calendar or lease year.
A landlord sets the base year at 2020 - when the building was largely vacant due to COVID-19 and operating costs were artificially depressed. In subsequent years, all increases above this deflated baseline were passed through to tenants, resulting in years of inflated expense-stop payments.
Negotiate to gross up the base year expenses to at least 95% occupancy. This prevents you from paying inflated escalations caused by an artificially low base established during periods of low occupancy. Before auditing your base year calculation, extract the exact base year and gross-up target from your lease using lextract.io; it pulls both fields automatically so you can compare them against the landlord's reconciliation.
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A CAM audit is only as accurate as your lease data. lextract.io extracts 126 structured fields from any commercial lease PDF: CAM definitions, pro-rata share, caps, base year, and audit rights. So you have the exact terms your landlord is supposed to follow.
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Find My OverchargesThis page provides general educational information. It is not legal advice and may not reflect the most current law in your state. Consult a licensed attorney for advice specific to your situation.
