Gross Up

A gross up clause is a provision in a lease that allows the landlord to overstate the operating expenses of a building. This happens in properties that can hold multiple tenants but are currently at a less than full occupancy. When the landlord utilizes this provision, the obligation of the current tenants' expenses is raised to assume the difference in costs. For example, imagine a building that is 25 percent occupied. Current operating expenses for the landlord are $100. Without the gross up, the tenants would only be obligated to pay $25 to cover their portion of the costs. When the landlord invokes the gross up provision, he or she could state the costs at $400, and the tenants would have to pay $100. This allows the landlord to pay all of the operating costs as he or she could with 100 percent occupancy.