Expense Stop

An expense stop is a term found in leases that provides a maximum amount a tenant is responsible for if expenses exceed an indicated limit. When a tenant leases space, the lease will require the landlord to pay certain expenses related to the entire building, such as taxes, communal maintenance and improvements. Part of the amount paid in rent is to cover these annual estimated expenses. The lease will establish the expense stop, and any expenses over that limit are charged by the landlord to the tenants based on their square footage leased. For example, if a landlord has a 10,000 square foot retail space leased to several tenants, and the estimated costs that the landlord covers is $50,000, and at the end of the year, the landlord finds that his expenses are actually $60,000, or $10,000 over the estimate, he can send a bill out to the tenants for their portion of the difference; it will be proportional to the square footage of their lease.