What is an expense stop lease?

An expense stop lease is a type of lease where the landlord agrees to pay operating expenses related to the property up to a certain limit, or "stop." Once the expenses exceed this predetermined amount, the tenant is responsible for all costs above this threshold. This structure is beneficial for landlords as it helps them control costs while providing tenants with a predictable rental rate.

The provided answer indicates that the property owner estimates total expenses when the building is 95-100% leased, which suggests a point at which they can accurately analyze and project expenses. However, a more precise understanding of an expense stop lease involves the specific financial arrangement between the landlord and tenant regarding shared responsibilities for operating costs.

The other choices do not accurately represent the nature of an expense stop lease. For instance, suggesting that the tenant covers all expenses contradicts the fundamental principle of an expense stop lease, where the landlord still retains responsibility up to a certain threshold. Similarly, stating that the landlord pays all operating expenses regardless of occupancy ignores the key aspect that tenants may share costs beyond the stop. Lastly, proposing that the tenant pays a fixed rate regardless of property expenses does not align with the variable cost structure inherent in an expense stop arrangement, as tenants would still face additional costs should expenses exceed the