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How does a base year lease work?

In a base year lease, a base year is selected (usually the first year of the lease). The landlord agrees to pay the property's expenses for the base year. The landlord continues to pay the property expenses at the base year level and the tenant agrees to pay its pro rata share of any increases in property expenses.

What is base year lease?

The term “base year” refers to the payment of property expenses under a lease. It portrays a situation where the landlord takes on most of those expenses without tenant reimbursement. A base year lease is sort of the middle ground between those two lease types.

What is a base year in commercial lease?

The base year is generally the first year of a commercial rental period that sets a precedent for how much tenants will pay for building expenses for each subsequent year.

What does base year mean?

The base period or base year refers to the year in which an index number series begins to be calculated. This will invariably have a starting value of 100. For example, in constructing the Consumer price index, the government may use a base year of 2000.

What is a base stop lease?

The LeaseMatrix Commercial Leasing Glossary defines a Base Year Stop as: The annualized amount per rentable square foot that a landlord pays toward the operating expenses of a building. Expense stops are often set following the first year of the lease (i.e. the Base Year).

Can a triple net lease have a base year?

Base year leases are common in office leases, and base year leases generally incentivize the parties in a way that is similar to the NNN structure. But in the base year structure, unlike the NNN structure, the landlord (as opposed to the tenant) is rewarded directly if operating expenses decrease.

What does base rent include?

The base rent is the initial rent, and depending on the lease provisions it may change over the term of the lease. In commercial properties, the base rent is the minimum due each month, with extra payments due based on, for example, a percentage of sales.

How is base rent calculated?

Percentage Over Base Amount The tenant pays a minimum base monthly rent in this case, then adds a percentage of all gross receipts over a certain base amount. For example, base rent might be $1,000 per month, plus 5% of all gross receipts over $50,000 per month.

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