The multiplier applied to variable operating expenses to normalize them to a fully-occupied building level. It is calculated as the target occupancy percentage divided by the actual occupancy percentage, and is used in CAM reconciliations to prevent tenants from benefiting from artificially low costs during vacancy periods.
Gross-up factor = gross-up target occupancy % ÷ actual occupancy % (applied only when actual occupancy is below the target). For example, if the target is 95% and actual occupancy is 70%, the gross-up factor is 95 ÷ 70 = 1.357. A variable expense of $100,000 is grossed up to $135,700. The factor applies only to variable expenses, those that genuinely fluctuate with occupancy. Applying the factor to fixed expenses (taxes, insurance) inflates the CAM pool beyond actual costs.
A landlord applies a gross-up factor of 1.36 to the entire operating expense pool, including property taxes ($180,000) and insurance ($90,000), both fixed costs. This generates $91,800 in phantom expenses that tenants pay for costs that never existed, without any corresponding reduction when occupancy rises.
Request the landlord's gross-up workpapers showing which line items were grossed up and the factor applied to each. Verify that every grossed-up expense is genuinely variable. Fixed-cost categories (taxes, insurance, fixed-rate service contracts) cannot be grossed up regardless of occupancy.
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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.
