What does Base Year mean in an Office Lease?

In order for landlord’s to keep their rental income somewhat steady, the base year method has gained popularity and appears in most full-service commercial leases. The base year concept is fairly simple – the first year a tenant occupies their space is usually set as the base year. Until December 31 of your base year, all of the expenses associated with your lease will be fully covered by the landlord. A dollar figure will be calculated reflecting the precise cost per square foot of the building expenses.

Your rent will still cover the building expenses that actually occurred during your base year, but any increases in building expenses will be passed through to you in the form of a separate bill. The landlord, or their property management company, will send you a reconciliation statement showing the total of the additional charges.