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What is the difference between a gross lease and a net lease?

On Behalf of | Dec 29, 2022 | Commercial Landlord Tenant Law |

When you rent commercial real estate, you will enter a lease that can look very different from leases of residential properties. Unlike many residential leases, commercial leases are often customized to meet the needs of the business and property owners, rather than simply using boilerplate forms.

The terms of a commercial lease will vary depending in part on what type of commercial lease it is. Two types of commercial leases are gross commercial leases and net commercial leases.

Gross commercial leases

If you have a gross commercial lease, you pay a fixed rental rate. You do not pay for any additional costs of property ownership.

Gross leases have the advantage of making it easy to budget. This allows companies to focus on business operations and growing profits without having to worry about paying additional costs associated with property ownership.

A disadvantage of a gross lease is possibly higher rent than other types of leases.

Net commercial leases

In contrast to a gross commercial lease, if you have a net commercial lease, you pay rent plus one or more additional costs of property ownership.

There are three general varieties of net leases. In a single net lease, you pay rent and taxes. In a double net lease, you pay rent, taxes and insurance. In a triple net lease, you pay rent, taxes, insurance and upkeep.

An advantage to a net commercial lease is it allows you more control over cosmetic aspects of the property and it allows you to negotiate costs of maintenance. However, you still must pay these costs on your own.

Businesses and property owners have the opportunity to negotiate commercial lease terms, whether it is a gross commercial lease or a net commercial lease.

Still, you can run into problems if your lease is ambiguous or can have alternate interpretations. For these reasons, it can help to have a legal professional review your commercial lease to ensure it is legally sound.