A lease structure, common in office buildings, where the landlord includes most or all operating expenses in the base rent. The tenant pays a single, all-inclusive rent amount with limited or no separate expense pass-throughs.
In a full service (or full service gross) lease, the landlord bundles operating expenses into the rent, covering property taxes, insurance, common area maintenance, janitorial services, utilities, and building management. However, most full service leases include an expense stop or base year provision that shifts cost increases above a threshold to the tenant. The "full service" label can be misleading because the tenant is not truly insulated from expense increases. Actual tenant exposure depends on the base year or expense stop amount and the rate of expense growth. Full service leases are the standard structure in Class A and Class B office buildings.
A landlord sets a low base year during a period of artificially reduced expenses (such as a pandemic year with low occupancy), ensuring that expense pass-throughs above the base year are triggered almost immediately and grow rapidly year over year.
In a full service lease, the base year or expense stop is the most important economic term after base rent. Negotiate a base year that reflects normal, stabilized operations. Avoid base years set during periods of unusually low expenses.
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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.
