The foundational year used to calculate operating expense increases in gross leases.
By Angel Campa, Founder · Updated March 2026
In gross leases, the base year establishes the operating expense benchmark. The tenant only pays their share of expenses exceeding the base year amount. If the base year expenses are artificially low (due to low occupancy, tax abatements, or deferred maintenance), the tenant faces inflated pass-throughs in subsequent years. A base year set during a year when the building was 50% occupied could result in significantly higher pass-throughs than expected.
Stated in the "Operating Expenses" or "Expense Stop" section of gross leases. Typically defined as a calendar year (e.g., "2025") or the first full calendar year of the lease term.
Lextract uses a combination of AWS Textract OCR and Claude AI to identify and extract the base year from your lease PDF. The AI searches for all pages of the document, then assigns a confidence score based on OCR quality and extraction certainty. Fields with lower confidence are flagged for human review.
Lextract automatically checks this field against its 15-rule red flag engine. Issues detected for base year:
Lease Structure
The categorization of expense sharing.
Pro Rata Share
The tenant's fractional responsibility for total building operating expenses.
CAM Cap %
The maximum allowable annual increase for controllable operating expenses.
CAM Cap Type
Specifies whether the CAM cap is cumulative and compounding or non-cumulative.
Gross-Up %
The assumed occupancy level used to extrapolate variable operating expenses.
Management Fee Cap
The maximum allowable percentage of gross revenues charged for property management.
The base year is the reference period (usually a calendar year) used to set the operating expense baseline in gross leases. The tenant does not pay additional operating expenses unless total building expenses exceed the base year amount. Any excess is passed through proportionally.
New buildings may have unusually low operating costs in their first year due to warranties, reduced maintenance needs, and tax abatements. If the base year is set during this period, the tenant faces large expense pass-throughs as costs normalize. Negotiating a base year gross-up provision mitigates this risk.
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