What does an office tenant owe above the base year?

Take this year's total building operating expenses, subtract the base year's total, and multiply the increase by the tenant's pro-rata share (their rentable square feet divided by the building's). In a 60,000 sq ft building where the base year cost $480,000 and this year cost $540,000, the increase is $60,000. A 4,000 sq ft tenant's share is 4,000 ÷ 60,000, shown as 6.67% and applied unrounded, so they owe $4,000 for the year, about $333 a month, on top of base rent. If the tenant was there for part of the year, multiply by the months occupied over 12. If expenses fall below the base year, they owe nothing extra.

All three decide how much of the building's operating expenses a tenant pays. Under a base year the landlord covers expenses up to the level of a named year and the tenant pays its share of any increase. An expense stop works the same way, but the landlord's limit is a dollar figure, usually per rentable square foot, written into the lease. Under a triple-net (NNN) lease there is no base at all: the tenant pays its share of taxes, insurance, and CAM from the first dollar, with base rent set lower to reflect that. Office leases tend to use base years or stops; retail and industrial leases tend to be NNN.

The base year is usually the first full calendar year of the lease, so a tenant who moves in during 2026 often gets a 2027 base year, although some leases name the year the lease starts. It matters because the tenant pays everything above it for the whole term. A low base year, such as one with a partly empty building, a mild winter, or a tax abatement, means increases start sooner and run larger, which is bad for the tenant. A high base year gives the tenant room before any pass-through begins and costs the landlord. Both sides should check what the base year actually included before signing.

If the building was not fully occupied in the base year, its variable expenses such as janitorial, utilities, and management were lower than they would have been with every suite filled. If this year's expenses are then grossed up to full occupancy while the base year is not, the increase is overstated and the tenant overpays. Most well-drafted leases gross up both the base year and each comparison year to the same occupancy, often 95% or 100%. This calculator takes the totals you enter as they are, so gross up both years first with the gross-up calculator if the lease calls for it.

The tenant pays nothing above base rent for that year. The pass-through only covers increases, so a year where expenses come in under the base year, or under the stop, produces a zero rather than a negative number, and the landlord absorbs the shortfall just as it absorbed the base year itself. The tenant does not get a rent reduction or a credit for the shortfall unless the lease specifically says so, which is rare. If the tenant paid monthly estimates toward an increase that did not happen, those estimates are reconciled and refunded or credited in the normal way.

Either. Most office leases state the stop per rentable square foot per year, for example $8.00, because that is easy to compare across buildings and to carry into a renewal. Some leases state a fixed annual total for the building, or for the tenant's share, instead. To use a fixed building total here, divide it by the building's rentable square feet to get the per-square-foot figure; the calculator shows the equivalent total alongside so you can check that it matches. If the stop is written as the tenant's own dollar amount, compare it directly with the tenant's share of this year's expenses.

It depends on the renewal language. Many renewals reset the base year to the first full year of the renewal term, so the tenant starts again with no pass-through and the landlord absorbs the expense growth of the original term. Others keep the original base year, so the tenant keeps paying the accumulated increase, which is worth a lot to the landlord over a long tenancy. Some set a new expense stop at the then-current expense level instead. Read the renewal option or amendment before quoting a renewal rent, and run both versions through this calculator to see what a reset is worth.

Because the two structures are the same math written differently. A $480,000 base year in a 60,000 sq ft building is $8.00 per square foot, and a tenant's share of expenses above $480,000 equals their square feet times the excess over $8.00 per square foot. The calculator shows both so an owner comparing a base-year lease with an expense-stop lease, or negotiating one against the other, can see them in the same units. The equivalence only holds when both use the same building area and the same definition of operating expenses, which is one more reason to read the lease.