A mechanism in a Full Service Gross Lease, the Expense Stop is a fixed amount of operating expense above which the tenant is responsible to pay. Thus, the landlord is responsible to pay for all operating expenses below the Expense Stop, while the tenant is responsible for any amount above the Expense Stop.
So for example, if the Expense Stop is $10 per square foot and operating expenses in a given year equal $11 per square foot, the tenant would be responsible to reimburse the landlord $1 per square foot ($11 – $10).
Expense Stops can take the form of an agreed upon amount, typically expressed in an amount per square foot or per square meter or a base year stop. A base year stop sets the expense stop equal to the actual operating expenses in the first year of the lease. So for instance, if the actual operating expenses in the first year amounted to $9.50 per square foot, the Expense Stop would be set at $9.50 per square foot and the tenant would be responsible to reimburse the landlord for any expenses above $9.50 per square foot in any subsequent year.
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