What is Gross-Up Clause?

Definition

A gross-up clause requires landlords to adjust variable operating expenses to reflect what they would have been if the building were fully occupied, typically at a defined threshold such as 85%, 90%, or 95%. This prevents tenants in partially occupied buildings from subsidizing vacant space by paying a disproportionate share of variable costs. BOMA 2024 defines the methodology for calculating gross-up adjustments in multi-tenant commercial buildings. The gross-up calculation applies only to variable expenses — fixed costs like property taxes and insurance are excluded. Incorrect gross-up thresholds or applying gross-up to fixed expenses are among the most common CAM billing errors. Property managers can extract the exact occupancy threshold from lease PDFs before reconciliation using <a href="https://www.lextract.io" target="_blank" rel="noopener noreferrer">lextract.io</a>.