A dollar threshold - typically set at the base year's per-square-foot operating cost - above which the tenant pays their share of operating expense increases. The landlord covers all costs up to the expense stop; costs above it are passed through to tenants.
Expense stops operate similarly to base year structures but expressed as a dollar amount per SF rather than a year reference. Example: "Expense stop of $8.50/SF. Tenant pays pro-rata share of operating expenses exceeding $8.50/SF annually."
A landlord set an expense stop of $9.00/SF based on 2019 expenses. By intentionally deferring $1.2M of maintenance to 2020 (the year after the lease started), actual costs jumped to $12.50/SF - pushing large escalations above the stop in the very first year.
Negotiate for the expense stop to be set at a normalized, fully-occupied expense level. Inspect the property's maintenance history before signing - deferred maintenance in the base year will result in above-stop charges in your early lease years. Extract the exact expense stop amount and gross-up target from your lease with lextract.io.
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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.
