What is Base Year?
A reference year established in a lease against which future operating expenses are compared, with tenants paying only the increase above base year levels.
Definition
The base year is a reference year established in a lease against which future operating expenses are compared. In a base-year lease, tenants pay only the increase in operating expenses above the base year level, making the landlord responsible for costs up to that threshold. Base year selection is critical because an abnormally low base year increases tenant obligations while a high base year reduces recovery potential. Base year drift — when the base year is applied inconsistently across lease renewals or amendments — is one of the most common sources of CAM billing errors and tenant disputes.
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