Expense Stop
A fixed dollar amount per rentable square foot above which the tenant pays their proportionate share of operating expenses. Common in full-service gross leases.
Model Lease Language Variations
“Base Rent is a gross rent inclusive of Operating Expenses up to and including the Expense Stop of $12.50 per rentable square foot per annum. Tenant shall pay Tenant's Proportionate Share of all Operating Expenses in excess of the Expense Stop.”
Fixed dollar stop with no inflation adjustment. As expenses rise, tenant absorbs an increasing share. Landlord benefits from setting stop below projected year-1 expenses.
“Tenant shall pay its Proportionate Share of Operating Expenses in excess of the Expense Stop. The Expense Stop shall be actual Operating Expenses for the Base Year (calendar year 2026), calculated on a fully occupied basis.”
Base year stop — pegged to actual first-year expenses. Grossed up to full occupancy to prevent windfall from vacancy. Tenant only pays escalations above year-1 actuals.
“Tenant shall pay its Proportionate Share of Operating Expenses (excluding Capital Expenditures, management fees above 3% of gross revenue, and Landlord's legal costs) in excess of the Expense Stop of $14.00 per RSF. The Expense Stop shall increase by two percent (2%) per annum.”
Higher stop with annual escalation and broad exclusions. CPI-like escalation keeps the stop relevant over the lease term, reducing tenant exposure.
Calculation Methodology
1. Determine total Operating Expenses for the calendar year. 2. Divide by total rentable SF to get per-SF expense amount. 3. Subtract the Expense Stop (per SF) from actual per-SF expenses. 4. If positive, multiply the excess by tenant's rentable SF. 5. Multiply by tenant's proportionate share percentage. 6. Bill tenant for the resulting amount (their share of excess over stop).
Common Drafting Errors
Setting the expense stop below projected first-year expenses — tenant has exposure from day one, defeating the purpose of a gross lease
Failing to gross up the base year stop when building isn't fully occupied — creates an artificially high stop that may never be exceeded
Not defining whether the stop applies to controllable expenses only or all operating expenses including taxes and insurance
Omitting whether capital expenditure amortization counts toward the stop calculation
Relevant Case Law
Tenant argued expense stop should be grossed up for vacancy in the base year. Court agreed, finding that without gross-up, the stop was artificially inflated by vacancy-reduced expenses.
Billing System Implications (Yardi / MRI)
In Yardi, expense stops are configured as recovery pools with a fixed stop amount or base year reference. Common error: not updating the stop amount when lease amendments change the terms. In MRI, expense stops are modeled in the Lease Abstract with a per-SF threshold — verify that the stop applies to the correct expense pool and that gross-up settings align with lease terms.
CapVeri Analysis
Expense stops are the predominant structure in full-service office leases. The most common billing error is failing to gross up the base year stop for vacancy, which can create a stop amount $1–3/SF higher than intended and delay tenant contributions for years.
Related Resources
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