Expense Cap Calculator

Expense caps limit tenant exposure to opex inflation. This calculator sizes the cap and unrecovered expense.

Base year expense

Annual cap %

Years elapsed

Actual expense this year

Capped recovery

$138,915

Uncapped recovery

$155,000

LL absorbs

$16,085

How the math works

Capped recovery = min(actual, base × (1+cap)^n). LL absorbs any excess.

Uncapped tenant leases are rare but most valuable. When accepting a cap, negotiate carve-outs for insurance, taxes, and utility increases above CPI — those are the big surprise expenses.

How to Use

Enter base year expense.
Enter cap type (CPI or fixed %).
Enter years elapsed.
Enter actual expense.
Read capped recovery.

Frequently Asked Questions

Cap types?

CPI-based: capped at CPI increase. Fixed %: 3-5% annually typical. Cumulative: compounds. Non-cumulative: caps per year; catch-up impossible.

Cap impact?

Good year (low inflation): minimal. Bad year (high inflation, hard insurance): LL absorbs significant excess. Stress-test caps against 5-7% expense growth.

Avoiding?

Don't accept fixed caps in unstable markets. CPI is fairer to LL but more complex. Many sophisticated tenants require caps — negotiate tight language.

How often should I rerun this?

Rerun this calculator whenever inputs change materially — new rent roll data, rate moves, loan balance updates, or quarterly operating data. For active deals, monthly refresh is typical. For stabilized assets under monitoring, quarterly is fine. Treat the output as a decision tool, not a one-time answer — market conditions evolve and so should your analysis.