Definition of "Stop clause"

Jodi Bakst, Broker real estate agent

Written by

Jodi Bakst, Brokerelite badge icon

Real Estate Experts

Leasing commercial or industrial real estate can be a perplexing process. As a tenant (and as a landlord,) you must consider several aspects before actually signing the deal. Even top local real estate agents recommend you to ask fundamental questions from your potential landlord

For instance, it would be best if you discussed details regarding the lease agreement and various clauses and provisions embedded to avoid future unpleasant surprises. Revealing and learning about crucial information on these agreements form the basis of landlord-tenant rights.

What does a stop clause in a lease agreement refer to?

A stop clause is integral to real estate deals, especially apartment leases. Under such circumstances, a stop clause, often known as an eviction or escalation clause, defines a provision in a lease agreement. More precisely, it indicates the maximum amount of operating expenditures that the landlord of the rental property is supposed to incur in a given year. The lessee must pay any amount incurred in excess of this amount.

Landlords can change provisions to fend off an unstable market.

Landlords are skilled at including stop clauses and escalation provisions into lease agreements. Imagine that rents in a particular area are rapidly rising. In that circumstance, landlords may reconsider signing a long-term lease instead of a short-term one. They know that this might result in a lost profit or a decrease in property valuation.

They can, however, increase rent by a particular amount at periodic intervals by including an escalation provision in the rental contract. As a result, they may capitalize on current market conditions. At the same time, the tenant can secure and safeguard their long-term contract.

The tenant’s financial obligations

On the other hand, landlords can demand that their tenants pay a pro-rata share of the growing building expenses. These payments may cover the premises’ operating charges and various real estate taxes. In matters of a commercial lease, the landlord will incorporate their legal requirements into the escalation or stop clause. Therefore, a renter’s payment determined under the stop clause will be considered a supplement to the standard rent the tenant covers.

Consequences of contract breach

In other words, the stop clause can set contract termination conditions. For instance, a theater proprietor signs an agreement with the producers of a theatrical performance. In the deal, they stipulate that the showrunners must leave the venue in the case that receipts of payment don’t add up to a certain amount.  

Final thoughts

As you observed, knowing the leasing contract’s terms and provisions is paramount both for tenants and property owners.

Suppose you entertain the idea of becoming a landlord. First and foremost, we advise you to investigate the rental market conditions in your area, such as where you should purchase a rental property first. Then, study previous lease contracts and include necessary clauses into your agreement to safeguard your financial investment.

image of a real estate dictionary page

Have a question or comment?

We're here to help.

*** Your email address will remain confidential.
 

 

Popular Real Estate Terms

Real property located in an excellent area for its designated objective. An example is a restaurant situated near office buildings, on the main boulevard, so it is easy to see, and has ...

legal ruling providing protection to home buyers of defective homes bought from a seller who then sold the contract to a third party. ...

A real estate broker who lists and sells houses or condominiums, as distinguished from a commercial broker who handles business property. ...

Company formed for the purpose of owning securities of one or more real estate corporations and assuming control over their practices and management. The other corporations are generally ...

Percentage of a geographic location's population to the number of persons employable by a basic industry in that area. A basic industry is one that draws income from outside the locality ...

Hollow building block whose dimensions are 8 x 8 x 16. Concrete blocks are widely used in the construction of foundations and outer walls. They provide strength and durability. ...

Compilation of all tax maps of a given tax district that are bound together and kept at the local tax office. The tax book is a public record that may be accessed by an individual for ...

The initial cost of a home plus any expense for final settlement that are not tax deductible plus capital improvements. ...

Every borrower has his own definition of amortization schedule in mind. An amortization schedule is a table that reveals how the debt is going to be paid back and at what cost. For most ...

Popular Real Estate Questions