A lease mechanism that adjusts variable operating expenses upward to reflect what they would have been if the building were fully occupied (typically 95%). Gross-ups prevent inflated costs when occupancy is low but also ensure tenants pay their true share.
Gross-up applies only to variable expenses - costs that fluctuate with occupancy, such as janitorial, utilities, and trash removal. Fixed expenses (insurance, taxes, management fees) cannot be grossed up because they do not change with occupancy. The gross-up formula: adjusted expense = actual expense × (occupancy target ÷ actual occupancy rate).
A landlord grosses up insurance premiums - a fixed expense that does not vary with occupancy. At 70% occupancy, the landlord inflates the $200,000 insurance bill to $285,714. Tenants pay 43% more than the actual insurance cost.
Audit every grossed-up expense category against your lease. The lease must specify which expenses are subject to gross-up. If it says 'variable expenses,' demand proof that each grossed-up item actually varies with occupancy. You can extract the gross-up clause and the list of qualifying expense categories from your lease PDF using lextract.io before reviewing the landlord's reconciliation workpapers.
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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.
