The office lease for Suite 402 at 539 Bryant Street in San Francisco is dated October 2013, with the day left blank in the copy filed with the SEC. SF OFFICE 2, LLC is the landlord. Life360 is the tenant. The premises are approximately 7,762 rentable square feet on the fourth floor of a 55,597 square foot building, base rent starts at $31,048 a month, and Tenant’s Share is stated in the summary of basic lease information as “Approximately 14%.” The base year for operating expenses is calendar 2014.[1]
Deep in Article 4 there is a sentence any tenant’s lawyer would be pleased to see:
If the Building is not at least ninety-five percent (95%) occupied during all or a portion of the Base Year or any Expense Year, Landlord shall make an appropriate adjustment to the components of Operating Expenses that vary based on occupancy for such year to determine the amount of Operating Expenses that would have been incurred had the Building been ninety-five percent (95%) occupied; and the amount so determined shall be deemed to have been the amount of Operating Expenses for such year…[2]
That is a gross-up, and it covers the base year as well as the comparison years, which is the thing tenants are told to negotiate for. The next three sentences take some of it back.
I pulled four executed office leases filed as exhibits with the SEC, each from a different landlord in a different market, and looked at what they do with the base year. All four gross it up. None of them does it the same way, and in every one the real money sits somewhere other than the gross-up sentence.
What a gross-up is for#
Most office leases charge the tenant a share of the increase in operating expenses over a base year rather than a share of the whole bill. Pick a base year, total the building’s expenses for it, and from then on the tenant pays its percentage of whatever the annual total exceeds that figure.
The trouble is that much of a building’s operating cost moves with how full it is: janitorial, electricity, water, elevator wear, management fees tied to collections. A building that was 68% leased in its base year spent less on those things than the same building at 90%, so the base year total is low, and every later year produces an increase that has nothing to do with costs rising. The tenant pays an escalation created by its neighbors arriving.
The gross-up is the fix. It restates expenses as if the building had been at an assumed occupancy, usually 95%, in both years, so the two numbers describe the same building. The lease for Tufin Software North America at 2 Oliver Street in Boston writes it out twice, once in each definition, in language identical word for word except for which year it names:
“Base Expenses”: The Operating Expenses paid or incurred during the Base Expense Year; provided, however, that if less than ninety-five percent (95%) of the Building Rentable Area is occupied during the Base Expense Year, Operating Expenses shall be equitably adjusted to the amount such Operating Expenses would have been if ninety-five percent (95%) of the Building Rentable Area had been occupied during the Base Expense Year. Only those component expenses that are affected by variation in occupancy levels shall be “grossed up."[3]
That last sentence is the limit that makes the whole thing defensible. Property taxes, insurance premiums and the roof do not get cheaper because the fourth floor is empty, so they are not grossed up.
The arithmetic is a multiplication. A building at 70% occupancy grossed up to 95% has its variable expenses multiplied by 95/70, which adds about 36%; at 80% occupancy the factor is 1.19. Which direction that points depends entirely on which year you apply it to. Applied to the comparison year alone it raises the tenant’s bill, and applied to both it mostly cancels.
What it is worth depends on the tenant’s share, and the four leases spread across the range. Tufin’s Proportionate Share is 1.48%, so every $100,000 by which the base year is understated costs it $1,480 a year. Life360’s is approximately 14%, which turns the same $100,000 into $14,000 a year and about $42,000 over its three year term. The Herndon lease below is 17.95%. A 1.48% tenant has no economic reason to read this clause at all. A 17.95% tenant does, and is usually the one who negotiated it.
The three sentences after the gross-up#
Here is what follows the gross-up in the Life360 lease, in order, with nothing omitted between them:
Operating Expenses for the Base Year shall not include market-wide cost increases due to extraordinary circumstances, including, but not limited to, Force Majeure, boycotts, strikes, conservation surcharges, embargoes or shortages, or amortized costs relating to capital improvements. In no event shall the components of Direct Expenses for any Expense Year related to Building utility, services, or insurance costs be less than the components of Direct Expenses related to Building utility, services, or insurance costs in the Base Year. If Landlord eliminates (as opposed to shifts or combines with another category) from any subsequent year a recurring category of expenses previously included in Operating Expenses for the Base Year, Landlord may subtract such category from Base Year Operating Expenses commencing with such subsequent year.[2]
Three mechanics, all pointing the same way.
The first takes things out of the base year that stay in every later year. Amortized capital costs are the clearest case: the same lease includes capital expenditures in Operating Expenses, amortized with interest over a useful life the landlord reasonably determines.[4] So a chiller amortized across the base year is excluded from the base year and included in year three, and the tenant pays its share of the full amortization rather than its share of the increase. “Market-wide cost increases due to extraordinary circumstances” does the same work with a wider net. In a lease signed in 2013 that phrase was about insurance and energy; read in 2026, after four years of tariff-driven materials pricing, it is doing more.
The second is a floor. Utility, service and insurance costs in any expense year can never be counted as less than they were in the base year, so if the building’s electricity bill falls the tenant keeps paying as though it had not. That is a ratchet, and we have written about the ratchet that keeps a base year from ever falling in a lease that applied it to everything rather than three categories.
The third is an option, and the word that matters is “may.” If the landlord stops incurring a category of expense, it may remove that category from the base year, which lowers the base year and raises the escalation. The symmetric provision is the next sentence, and it is drafted as a duty: if the landlord adds a category not in the base year, it “shall add such category (and the amount corresponding thereto) to Base Year Operating Expenses."[2] In substance the lease is even handed about new and eliminated categories. One direction is mandatory and the other is at the landlord’s election, and a landlord that eliminates a category has no reason not to elect.
So the base year that was grossed up to 95% occupancy is then reduced by its capital amortization, reduced by anything market-wide and extraordinary, pinned as a minimum for three of the largest line items, and shrinkable at the landlord’s option. Of the four sentences, only the gross-up moves it up.
A base year set in calendar 2020#
On 12 March 2020, TMG TMC 3, L.L.C. and Alarm.com signed the Ninth Amendment to a deed of office lease at 8281 Greensboro Drive in Tysons, Virginia. It added 6,346 square feet on the third floor to a tenancy already running to about 166,000 square feet of a 257,824 square foot building, at $263,358.96 a year, or $41.50 per square foot. The expense provision reads:
As used herein, (a) “Tenant’s Third Floor Premises Pro Rata Share” shall mean 2.46% (i.e., based on a Total Rentable Area of the Building of 257,824 rentable square feet), and (b) the “Third Floor Premises Base Year” for Expenses and Taxes shall mean calendar year 2020. Expenses for the Third Floor Premises Base Year shall be grossed-up, as provided in Section 5.03.C. of the Original Lease, to reflect a ninety-five percent (95%) occupancy rate for the Building. Taxes for the Third Floor Premises Base Year shall reflect actual Taxes assessed or imposed upon the Property or Landlord, as applicable, during the Third Floor Premises Base Year.[5]
One base year, two treatments. Expenses grossed up to 95%. Taxes at whatever was actually assessed.
The date is why this is interesting. The parties fixed a base year of calendar 2020 eleven days before the Commonwealth of Virginia closed. The occupancy-driven components of that building’s expenses then collapsed, and the clause restates them as though the building had been 95% full all year. Without that sentence Alarm.com would have been escalating off a base year depressed by a pandemic for as long as the lease ran.
Taxes go the other way, and the drafting is right about that. A gross-up on taxes would be meaningless, because an assessment does not care how many desks are occupied. But taxes do respond to vacancy, on a lag, through the assessment cycle, and Tysons assessments made in 2020 were still looking at pre-2020 income. So the 2020 tax base year is high, which protects the tenant, and when assessments later caught up the tenant owed nothing on taxes for years. The same calendar year cuts one way on expenses and the opposite way on taxes, and the amendment gets both halves pointing at the tenant. That is what a 166,000 square foot tenant’s lawyer is for. A base year is not simply early or late: it is a different instrument for each cost category it governs, which is the same lesson as the four five-year options that turned a lease into a change of ownership for property tax purposes.
The clause that anticipated free rent#
The best drafted gross-up of the four is in a deed of lease for Suite 300 at Northridge II at Woodland Park, 13241 Woodland Park Road, Herndon, Virginia. Northridge Office Building LLC is the landlord, the tenant was Spaceflight Industries, now BlackSky, and the premises are 23,738 square feet of a 132,264 square foot building for a proportionate share of 17.95%. Base Operating Costs are the costs incurred during calendar year 2020.
(e) Gross Up. If less than one hundred percent (100%) of the Building rentable area shall have been occupied by tenants at any time during the calendar year, Base Operating Costs, or Annual Operating Costs, as the case may be, shall be deemed for such year to be an amount equal to the like expenses which Landlord reasonably determines would normally be incurred had such occupancy been one hundred percent (100%) throughout such year. In no event shall Landlord receive from all tenants in the Building more than 100% of the Annual Operating Expenses. Notwithstanding the foregoing, management fees in Tenant’s Base Year shall be grossed up as if the Building were fully leased, with full rents, regardless of any rental abatements.[6]
Three things in one paragraph. The assumed occupancy is 100%, which is better for the tenant than the 95% market standard. Base Operating Costs are named inside the gross-up sentence, so there is no argument about whether the base year is covered. And there is a cap running the other way: the landlord cannot collect more than it actually spent, which is the protection against a gross-up producing a profit across the rent roll. Life360’s lease has that cap. Tufin’s does not.
The last sentence is the one worth stealing. Management fees are usually a percentage of gross receipts, so a building full of free rent collects less and the fee is lower, which means a base year negotiated during a leasing push comes in artificially low even after an occupancy gross-up. The space is occupied. It simply is not paying. The occupancy test does not catch that, so this lease grosses up base year management fees on a different assumption: fully leased, full rents, “regardless of any rental abatements.”
Somebody had been burned by that before. You can usually tell which sentences in a lease are scar tissue.
Occupied means leased, not used#
Every one of these four clauses turns on occupancy, and not one of them defines it.
In 2026 that gap is wider than when any of them were signed. CBRE put the national office vacancy rate at 18.3% in the second quarter of 2026, down 30 basis points, with 12.6 million square feet of net absorption.[7] Kastle’s keycard data for the week of 22 September 2026 put physical use across ten cities at 54.7% of the pre-pandemic baseline, with Class A+ buildings averaging 76.1%.[8] Those measure two different things, and the gap is around 27 points.
For gross-up purposes the leased number is the right one, and all four clauses reach it. Tufin’s asks whether the Building Rentable Area “is occupied.” Life360’s asks whether the Building “is … occupied.” The Herndon lease asks whether the rentable area “shall have been occupied by tenants,” which is the clearest of the four, because “by tenants” rules out the other reading. A landlord whose variable costs really did fall because half the tenants stopped showing up would like to argue the building was 54.7% occupied and the gross-up factor is 95/54.7, or 1.74. No reported case has tested it. The drafting that prevents the argument is two words long.
This is the same distinction that decides co-tenancy clauses, where we looked at one center’s leases measuring open stores and another’s measuring signed leases. In co-tenancy the tenant wants the test to measure open doors. In a gross-up it wants the test to measure leases. Same word, opposite interest, and the two clauses often sit forty pages apart in one document.
The fight is about the denominator#
There is almost no case law on gross-up clauses, and what exists is about the arithmetic rather than the language. The clearest recent example is a RICO suit a law firm brought against its own landlord.
Munck Wilson Mandala LLP leases office space at Banner Place, 12770 Coit Road in Dallas. Its predecessor signed the lease with Gaedeke Holdings II in 2007, and a Fourth Amendment in May 2010 extended the term to 2025. In early 2017 the building was bought by JP-Banner, LP, managed by Sooner. The firm exercised its audit right, hired a third party auditor to review the operating expense reports for 2017, 2018 and 2019, and then sued eleven defendants, alleging a racketeering enterprise. Among the allegations, as Chief Judge Barbara Lynn of the Northern District of Texas described them:
For example, Plaintiff complains that JP-Banner, LP and Sooner “manipulated square footage” and “fraudulent grossed up expenses” by including an additional 5,000 square feet in Banner Place’s rentable area when determining building occupancy for certain occupancy-based expenses. FAC paragraphs 67-68 (alleging that the 2017 and 2018 OPEX Reports fraudulently grossed up expenses using 285,111 square feet as the basis for determining occupancy percentage, rather than 280,432 square feet, the rental area stipulated in the Lease).[9]
Those two numbers differ by 4,679 square feet, which the complaint rounds to 5,000. Enlarging the denominator lowers measured occupancy, and since the gross-up divides by measured occupancy, it raises the grossed-up expense figure by the ratio of the two areas: 285,111 over 280,432, or about 1.67%. The alleged move is to run the occupancy calculation on the bigger number while leaving each tenant’s share on the stipulated one. The firm claimed it should have been credited at least $419,007.00 for 2017 and 2018 and at least $104,601 for 2019, across that and several other alleged overcharges including inflated management fees and janitorial work it said was never done.[10]
The court dismissed the case, and the sentence that did it is short:
Such a manipulation of charges could feasibly support an allegation of fraud if it were concealed from Plaintiff. However, the 2017 and 2018 OPEX reports attached to the FAC reflect that Defendants disclosed to Plaintiff that occupancy-based expenses for those two years were being calculated using the complained-of larger rental area, i.e., Defendants did not disclose or hide it.[9]
The gross-up was on the face of the report. Showing the work is what defeated the fraud theory, because mail and wire fraud need a misrepresentation, and an arithmetic choice printed in the statement is not one. The RICO claims failed for other reasons too: the predicate acts were all mailings about one dispute with one victim, and the other suits against the same defendants “lack the criminal ‘hook’” because none involved tenant disputes about operating expenses.[11] With no federal claim left, the court declined supplemental jurisdiction over the contract claim. Thirteen months after filing, the firm was where it started.
None of which means the landlord was right. The court never decided whether 285,111 or 280,432 was correct, and the lease stipulated the smaller one. What it decided is that a gross-up overcharge is a breach of lease and nothing more exotic, which makes the lease’s own audit machinery the entire remedy. Which brings up the clause everybody signs without reading.
The base year audit window closes before the base year statement arrives#
Tufin’s lease is the symmetric one. Both years grossed up, same 95%, same variable-only limitation, identical words. Then the audit provision:
Any such statement by Landlord shall be binding and conclusive upon Tenant unless within sixty (60) days after the giving by Landlord of such statement Tenant shall notify Landlord that Tenant disputes the correctness of such statement… If Tenant timely sends a notice to Landlord disputing the statement received from Landlord, Tenant may, at Tenant’s sole cost and expense, undertake an audit of such of Landlord’s books as are directly relevant to the Operating Expense statement for the Expense Year in question (which may include an audit of the Base Expense Year provided Tenant’s request to undertake an audit of the Base Expense Year is received by Landlord within sixty (60) days after the end of the Base Expense Year)…[12]
Read the parenthetical against the clause two paragraphs earlier in the same section: “Within a reasonable amount of time after the end of each Expense Year, Landlord shall submit to Tenant a reasonably detailed statement of Operating Expenses for such Expense Year."[12]
The base year here is calendar 2017, so the window to request an audit of it ran to 1 March 2018. There is no date by which the landlord has to produce the 2017 statement, only “a reasonable amount of time,” and office reconciliations commonly arrive in the spring. Tufin’s first statement covering a full year of occupancy would have been the one for 2018, issued sometime in 2019. By then the right to audit the base year, the one number that sets every escalation for the rest of the term, had been gone for a year.
Nothing in that sentence is unfair on its face. Sixty days is a real window, and a tenant with a lease administrator and a calendar can use it. It catches only the tenant who waits to see a number before deciding whether to look at the number, which is most tenants.
Compare Life360’s, which solves the timing without anybody having to diary anything. The landlord furnishes a statement “concerning the Direct Expenses for such Expense Year (and the Base Year),” so the base year is reopened and re-presented every year.[13] The tenant then has 30 days after receipt to dispute, and if it does, the certification is made by an independent CPA selected by the tenant, who may not have been engaged by the tenant in the preceding five years, may not be paid on commission or contingency, must be reasonably approved by the landlord, and whose certification “shall be final and conclusive.”
That is a real audit right with four conditions on who may run it. The five year prohibition is the one people miss: a tenant that used a particular firm last year for anything cannot use it here. With the 30 day clock, the tenant needs its auditor picked before the statement arrives. Same timing problem from the other end in CAM audit rights with a clock that expires first.
Can you tell which of your leases gross up the base year?#
Four leases, four landlords, four answers to the same question, and the differences are not in the gross-up sentence. They are in the sentences next to it, and in the audit clause thirty pages later.
That question is easy to ask and expensive to answer by reading. Acrebase extracts the clauses across a portfolio and makes them comparable, so “which of my leases gross up the base year, and to what assumed occupancy” returns a table rather than a stack of PDFs. For the base year the useful columns are: assumed occupancy percentage, whether the base year is named in the gross-up or only the comparison year, whether the gross-up is limited to variable components, whether a cap stops collections exceeding actual spend, what is carved out of the base year, whether any floor applies to later years, whether management fees are grossed up separately, and the deadline to audit the base year. Eight fields, and these four leases fill them in eight different patterns.
Acrebase also keeps a team’s approved clause library and negotiation playbook, which is where this gets fixed rather than found. If your house position is that gross-ups apply to both years at the same assumed occupancy, that the base year takes no carve-outs the comparison years do not take, that management fees get their own full-rent gross-up, and that the base year stays auditable for as long as it is used, that position should look the same in every lease your team signs instead of depending on whose form the deal started from. Its AI reads how earlier negotiations went, so when a draft comes back with the base year quietly dropped out of the gross-up definition, the flag arrives with the fallback the team accepted last time. Related clauses we have covered: the base year ratchet, a carbon penalty arriving as an operating expense, and an escalation from an index month that was never published.
If you are a landlord, decide what “occupied” means and write it down, because leased and used are 27 points apart and the two words that settle it are “by tenants.” Keep the cap: no gross-up should let you collect more than you spent across the rent roll, and a tenant who finds that cap missing will assume the worst about the rest of the article. If you want carve-outs from the base year, take them in the definition of Operating Expenses so they apply to every year, not in a proviso aimed at the base year alone; the asymmetric version is what gets audited, and what turns a reconciliation dispute into an accusation. And if your gross-up runs on a rentable area, use the one the lease stipulates. Banner Place shows you can win that fight and still spend a year in federal court over 4,679 square feet.
If you are a tenant, four checks, in order of what they are worth. First, does the gross-up name your base year, or only the comparison years? If only the comparison years, you are paying an escalation manufactured by your neighbors moving in. Second, read the sentences immediately after it, because that is where the base year gets carved down, floored and made optional, and those sentences are usually longer than the gross-up itself. Third, find the management fee: if it is a percentage of receipts and your base year was a concession year, an occupancy gross-up does not reach it, and you want the Herndon sentence. Fourth, put the base year audit deadline in a calendar the day you sign. In at least one of these leases it expires before the first statement arrives, and once it is gone the number driving every escalation for the rest of the term is simply agreed.
Footnotes
[1] Office Lease, 539 Bryant Street, San Francisco, between SF OFFICE 2, LLC as Landlord and LIFE360, Inc. as Tenant, filed as Exhibit 10.20 to Life360’s Form 10-12G/A on 13 June 2022. Summary of Basic Lease Information: date “October , 2013” with the day left blank in the filed copy; Building 55,597 rentable square feet; Premises approximately 7,762 rentable square feet, Suite 402; base rent $31,048.00 a month for months 1 to 12, rising to $32,938.82 for months 25 to 36; Base Year calendar 2014; Tenant’s Share “Approximately 14%”; three year term. The $48.00 per square foot rate, the implied 13.96% share and the $14,000 a year per $100,000 of base year understatement are my arithmetic. https://www.sec.gov/Archives/edgar/data/1581760/000119312522172365/d328928dex1020.htm
[2] Same lease, Article 4, within the definition of Operating Expenses. The gross-up sentence, the base year exclusions, the floor on utility, service and insurance components and the eliminated-category provision appear consecutively in the order quoted, with nothing omitted between them. The New Category provision follows immediately and is quoted in part in the body; it also grosses a mid-year category up to a full year and bars retroactive adjustment for intervening years. Reading “may subtract” against “shall add” as the asymmetry is my characterization.
[3] Lease for part of the seventh floor of 2 Oliver Street, Boston, between NS Two Oliver LLC as Landlord and Tufin Software North America, Inc. as Tenant, filed as Exhibit 10.5 to the Form F-1 of Tufin Software Technologies Ltd. on 6 March 2019. The Effective Date line reads “Effective Date: , 2017” with day and month blank. Basic Data: Building Rentable Area “Agreed to be 217,435 rentable square feet”; Premises 3,214 square feet; Tenant’s Proportionate Share 1.48%; Base Expense Year calendar 2017; Base Tax Year fiscal 2018; base rent $141,416.00 a year for months 4 to 15 after three free months, rising to $154,272.00 for months 52 to 63. The quoted “Base Expenses” definition is complete, and “Expense Increases” repeats the same proviso verbatim for any Expense Year. The $44.00 per square foot and $1,480 per $100,000 figures are mine. https://www.sec.gov/Archives/edgar/data/1757399/000162828019002556/exhibit105f-1.htm
[4] Same Life360 lease, in the inclusions within Operating Expenses, which cover capital expenditures in three categories and then provide “that any capital expenditure shall be amortized (including interest on the amortized cost) over its useful life as Landlord shall reasonably determine.” The chiller is my illustration. What “market-wide cost increases due to extraordinary circumstances” would capture in 2026 is my judgment; the lease does not define the phrase and I have no information about this building’s expense history after 2014.
[5] Ninth Amendment to Deed of Office Lease Agreement, “made this 12 th day of March, 2020,” between TMG TMC 3, L.L.C. as Landlord and Alarm.com Incorporated as Tenant, 8281 Greensboro Drive, Tysons, Virginia, filed as Exhibit 10.1 to Alarm.com Holdings’ Form 10-Q on 7 May 2020. The Original Lease is dated 8 August 2014 with the landlord’s predecessor. Source for the 257,824 rentable square foot building, the 2.46% Third Floor Premises Pro Rata Share, the calendar 2020 base year and annual base rent of $263,358.96 at $41.50 per square foot rising to $45.01 by 1 May 2023. The gross-up mechanic itself sits in Section 5.03.C of the Original Lease, which is not in this filing, and the percentage of the referenced Controllable Expenses Cap is likewise not stated. Virginia’s stay at home order issued on 23 March 2020, eleven days after the amendment. The reasoning about which way a 2020 base year cuts for expenses and for taxes is my analysis; I have no figures for this building’s 2020 occupancy or its assessments. https://www.sec.gov/Archives/edgar/data/1459200/000145920020000012/ex101ninthamendmenttolease.htm
[6] Deed of Lease for Suite 300, Northridge II at Woodland Park, 13241 Woodland Park Road, Herndon, Virginia, between Northridge Office Building LLC as Landlord and Spaceflight Industries, Inc. as Tenant, filed as Exhibit 10.25 to the Form S-1 of BlackSky Technology Inc. on 25 October 2021. Section 4(e) is quoted in full. Section 4(c) deems the Premises 23,738 square feet, the Building 132,264 square feet and Tenant’s proportionate share 17.95%, measured under BOMA ANSI Z65.1-1996. Base Operating Costs are the Annual Operating Costs incurred during calendar year 2020. I did not find the execution date or the base rent in this exhibit. That management fees are a percentage of gross receipts is the standard structure and the only reading under which the last sentence does any work, but this lease does not say how the fee is computed, and the remark about scar tissue is a guess. https://www.sec.gov/Archives/edgar/data/1753539/000119312521305700/d136472dex1025.htm
[7] CBRE Research, “Q2 2026 U.S. Office Market Report,” published 29 July 2026: “The overall office vacancy rate fell by 30 basis points (bps) in Q2 to 18.3%, the largest quarterly decline since 2015,” and “Net absorption nearly doubled quarter-over-quarter in Q2 to 12.6 million sq. ft., marking the ninth consecutive quarter of positive demand.” Q3 2026 figures were not published as of 2 October 2026. Cushman & Wakefield reports net absorption for the same quarter as negative, a difference in tracked inventory rather than an error, so the two houses should not be mixed. https://www.cbre.com/insights/figures/q2-2026-us-office-market-report
[8] Kastle Systems, “Getting America Back to Work” Barometer, week of Thursday 22 September through Wednesday 28 September 2026: ten-city average 54.7%, down 1.6 points week over week; Tuesday 22 September the peak day for all classes at 65.3%; Class A+ buildings down 2.9 points to 76.1%. The barometer uses anonymized access-control data against a pre-COVID baseline, which is not what any of these leases refer to. The 27-point gap against 18.3% vacancy, implying 81.7% leased, is my arithmetic and compares two incompatible metrics on purpose, because that is the comparison the undefined word invites. https://www.kastle.com/safety-wellness/getting-america-back-to-work/
[9] Munck Wilson Mandala LLP v. Mark D. Jordan, et al., No. 3:22-cv-01657-M (N.D. Tex.), Memorandum Opinion and Order, ECF No. 90, filed 22 August 2023, Chief Judge Barbara M. G. Lynn, at pages 15 to 16. Both passages are verbatim; “FAC paragraphs 67-68” replaces the paragraph symbols in the original. The lease covers office space at Banner Place, 12770 Coit Road, Dallas; the plaintiff’s predecessor signed it with Gaedeke Holdings II, Ltd. on 30 May 2007, and the Fourth Amendment of 27 May 2010 extended the term to 2025. JP-Banner, LP bought the building in early 2017; Sooner is the property manager. That 285,111 and 280,432 differ by 4,679 square feet, that their ratio is about 1.67%, and the explanation of how a larger denominator raises the grossed-up figure are mine. The court made no finding about which rentable area was correct. https://www.govinfo.gov/content/pkg/USCOURTS-txnd-3_22-cv-01657/pdf/USCOURTS-txnd-3_22-cv-01657-0.pdf
[10] Same opinion, pages 4 to 5, summarizing the First Amended Complaint: the plaintiff “exercised its rights under the lease and engaged a third-party auditor to conduct a lease audit of the OPEX reported by JP-Banner, LP for 2017, 2018, and 2019,” and alleges it “should have been credited at least $419,007.00 for OPEX in 2017 and 2018, and at least $104,601 for OPEX in 2019.” The other alleged overcharges are “inflating management fees owed to Sooner, improperly charging salaries of individuals working for Sooner as operating expenses, and charging for janitorial services not performed,” plus no reports at all for 2020 and 2021. Suit was filed 29 July 2022 and argument was heard 5 June 2023.
[11] Same opinion, pages 21 to 22, on the pattern element, and page 1 on the disposition: the motions to dismiss are granted, no claim is stated under RICO, 18 U.S.C. sections 1961 to 1968, and the court “declines to exercise supplemental jurisdiction over Plaintiff’s remaining state law claims,” which included the contract claim against JP-Banner, LP. A fee opinion followed on 20 May 2024 at ECF No. 107. I have not checked what became of the contract claim in state court.
[12] Same Tufin lease, in the Operating Expense payment and reconciliation provisions. The quoted audit paragraph continues with conditions requiring no uncured Event of Default, payment of all billed Expense Increases as of the audit date, and that the audit be done by the tenant’s own staff or an independent CPA or brokerage firm reasonably approved by the landlord whose fee is fixed by contract and not computed from the result. The 1 March 2018 date is my arithmetic from a calendar 2017 Base Expense Year. That office reconciliations commonly arrive in the spring is a general observation, not something this lease says, and I do not know when Tufin’s 2017 statement was delivered.
[13] Same Life360 lease, in the review provisions following the Operating Expense statement. The landlord must furnish the statement from its accountants, including its in-house bookkeeper, within 30 days after the tenant’s written request, with “sufficient detail to enable Tenant to verify that the terms of exclusions and inclusions with respect to Direct Expenses, as set forth in this Lease, have been adhered to.” The tenant’s agents must follow the landlord’s reasonable rules and sign a confidentiality agreement. The sole remedy after certification is payment or reimbursement with interest at the Wall Street Journal prime rate plus 2%, subject to the usury limit. Note that the statement comes on request rather than automatically, which leaves the annual timing with the tenant.#
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