A lease clause that allows the landlord to recover capped amounts from prior years when actual expenses exceeded the cap. If expenses were held down by the cap in previous years, the catch-up provision lets the landlord recoup the difference in a later year when expenses fall below the cap.
A catch-up provision operates alongside a cumulative cap by tracking the cumulative difference between actual expenses and capped amounts. When actual expenses in a given year fall below the cumulative cap ceiling, the landlord can bill up to the ceiling rather than actual expenses, recovering prior year shortfalls. The provision effectively converts a cap from a cost-saving mechanism into a cost-smoothing mechanism, where total expenses over the lease term approach actual costs.
A landlord invokes a catch-up provision to bill $2.00/SF above actual expenses in a low-cost year, citing prior year shortfalls. The tenant receives a bill higher than actual expenses with no clear explanation of how the catch-up amount was calculated.
If your lease includes a catch-up provision, maintain your own running ledger of capped vs. actual expenses each year. When the landlord invokes a catch-up, verify the cumulative math against your records. Better yet, negotiate to remove catch-up provisions entirely during lease negotiation.
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Find My OverchargesThis page provides general educational information. It is not legal advice and may not reflect the most current law in your state. Consult a licensed attorney for advice specific to your situation.
