An expense stop is a lease provision that limits the landlord’s obligation to pay for certain operating expenses of a property. The lease agreement will specify an expense stop, which is usually given as a dollar amount per square foot. This amount represents the maximum that the landlord agrees to pay for the property’s operating expenses in a year.
Any operating expenses that exceed this amount (the expense stop) will be the responsibility of the tenant. The tenant will have to pay their proportionate share of these overage expenses, which is often referred to as “pass-throughs” or “additional rent.” This could include costs like utilities, maintenance, insurance, taxes, and more.
The purpose of an expense stop is to protect landlords from increasing operating costs over time. It provides a degree of certainty for landlords’ expenses, while placing the risk of increased costs onto the tenant. It’s important for both landlords and tenants to negotiate and fully understand these terms, as they can significantly impact the overall cost of a lease.