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Base Year

Base Year is a term commonly used in commercial leases, especially those with triple net (NNN) lease structures.

The Base Year is the first year of a lease agreement, and it sets a benchmark for operating expenses, such as property taxes, insurance, and maintenance costs. During the base year, the landlord typically covers all of these operating expenses.

In subsequent years after the base year, the tenant may be responsible for paying for any increases in these operating expenses over the base year amount. For example, if property taxes increase in the second year of the lease, the tenant would be responsible for paying the difference between the base year taxes and the increased amount.

The base year provision is significant because it can have a major impact on the tenant’s future costs. Tenants and landlords need to negotiate and clearly define these terms in their lease agreements to avoid potential disputes later on.