What Is the Difference Between a Gross Lease and a Net Lease?
The difference between a net lease and a gross lease resides in the party responsible for paying the regular operating costs, notes the Equity Global Management website. Under a net lease, the tenant is responsible for these costs, whereas in a gross lease the owner or landlord is responsible.
Net leases are either double-net or triple-net in structure, reports Equity Global Management. In a double-net lease, the tenant pays for routine maintenance costs, utilities, taxes and insurance. In addition, the owner is responsible for building or structural repairs. In contrast, under a triple-net lease, the tenant is responsible for routine maintenance, utilities, taxes, insurance and structural repairs. The term of a net lease is typically 10 to 15 years. This longer lease term helps control tenant improvements, brokerage commissions and re-tenanting costs over a given period of time.
The gross lease is more common in multi-tenant and single-tenant office buildings, industrial and retail properties. Under this agreement, the landlord accepts a fixed rent payment and is responsible for all tax, maintenance and insurance costs, explains About.com. Certain gross leases contain escalation provisions that can increase the rent cost to tenants. This cost increase helps offset possible tax and insurance increases.