Glossary
Calculations & Formulas
Gross-Up Factor
The multiplier applied to variable operating expenses to normalize them to a fully-occupied building level. Calculated as the target occupancy percentage divided by the actual occupancy percentage during the reconciliation period.
Firm impact
Verifying the gross-up factor requires three inputs: the target occupancy from the lease, the actual occupancy percentage from the rent roll, and the list of qualifying variable expenses. Firms that check all three inputs catch overcharges that pass visual review.
How this gets abused
A landlord applies a gross-up factor of 1.36 to the entire operating expense pool, including property taxes ($180,000) and insurance ($90,000), both fixed costs. This generates $91,800 in phantom expenses billed to tenants, with no corresponding basis in the lease.
Practitioner note
Request the gross-up workpapers from the landlord showing which line items were grossed up and the factor used for each. Compare the factor to the actual occupancy percentage for the reconciliation year.
FAQ
Questions about gross-up factor
How is the gross-up factor calculated?
Gross-up factor = target occupancy % divided by actual occupancy %. If the lease specifies a 95% gross-up target and the building was 75% occupied during the year, the factor is 95 divided by 75 = 1.267. Each qualifying variable expense is multiplied by this factor to normalize it.
Does CAMAudit verify the gross-up factor in a reconciliation?
CAMAudit's occupancy normalization check checks whether the factor was applied correctly: it verifies that grossed-up expenses are variable (not fixed), that the factor matches the occupancy percentage specified in the lease, and that the factor was not applied to the entire CAM pool.
You know the term. Now check the math.
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