Gross Up Adjustment When the Project Is Less Than Fully Occupied Clause Samples

The "Gross Up Adjustment When the Project Is Less Than Fully Occupied" clause defines how certain operating expenses are recalculated as if the property were fully occupied, even when actual occupancy is lower. In practice, this means that variable expenses—such as utilities, cleaning, or maintenance—are adjusted upward to reflect what they would be if all rentable spaces were leased and in use. This adjustment ensures that tenants pay a fair share of expenses, preventing the landlord from absorbing costs due to vacancies and avoiding disproportionate charges to current tenants. Ultimately, the clause allocates operating costs equitably among tenants and protects the landlord from revenue shortfalls caused by under-occupancy.
Gross Up Adjustment When the Project Is Less Than Fully Occupied. If the occupancy of the total Rentable Square Footage of completed, partially occupied buildings within the Project during any part of any Expense Year (including the Base Year) is less than 95%, Landlord shall make an appropriate adjustment of the variable components of the Direct Expenses for that Expense Year, as reasonably determined by Landlord using sound accounting and management principles, to determine the amount of Direct Expenses that would have been incurred had the Project been 95% occupied and fully assessed for tax purposes. This amount shall be considered to have been the amount of Direct Expenses for that Expense Year. For purposes of this Paragraph 8.2, “variable components” include only those component expenses that are affected by variations in occupancy levels, such as water usage. If the Building or the Project is not fully assessed (i.e., assessed on a completed basis) for real property tax purposes for the entirety of the Base Year, Tax Expenses for the Base Year shall be adjusted to reflect the Building and the Project as being fully assessed for the entirety of the Base Year.
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