Legal Advice During Challenging Times

What is a gross lease?

On Behalf of | Apr 9, 2024 | Real Estate Law |

Renting a commercial property is not at all like renting a residential property. Commercial leases are endlessly customizable and usually take a lot of negotiation. That makes it important to understand the different types of commercial leases available, including gross leases.

A gross lease is also sometimes called a “full-service” lease. The tenant pays a fixed rental amount to the landlord, and the landlord then assumes all of the responsibility for covering the property taxes, insurance, maintenance and repairs. Sometimes even the utilities and janitorial services are included in the same flat fee.

Landlords and tenants both like gross leases

Landlords and tenants often like gross leases (or modified gross leases that have been adjusted to suit their individual needs) because they’re simple and easy to manage. It takes less financial management on both ends of the agreement. 

Unlike various net leases, where a tenant has additional monthly costs aside from their basic rent, a gross lease payment covers all operating expenses. Tenants enjoy the fact that they can make one payment to cover all their overhead costs, and they love the predictability of the expense. That allows them to budget more effectively without worrying about a sudden maintenance bill or a hike in taxes.

Gross leases are particularly popular among landlords with multiple tenants, especially small businesses with owners who value consistency in their lease agreements and monthly bills. The fixed rental amounts tend to attract renters easily, and that gives landlords a predictable income stream. 

Both would-be commercial landlords and potential commercial tenants can benefit from experienced legal guidance when drafting, negotiating and reviewing their leases.