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How Do Gross and Net Commercial Leases Differ?

Burgoyne Law Offices July 28, 2020

Whether you own a piece of commercial real estate or you own a business looking to lease commercial property, it will be important for you to know that there are multiple types of commercial leases.

Each type of lease offers different features to evaluate so you select the one that best fits your needs. Some commercial leases are referred to as net leases and others as gross leases.

Net Leases for Commercial Properties

As explained by CrowdStreet, tenants and landlords share responsibility for the operating expenses associated with the property. Expenses include utilities, repairs, upkeep, property insurance and property taxes. These types of leases may allow rent prices to remain on the lower end of the spectrum.

A net lease may be setup as a single, double or triple net lease depending on which of the expenses the tenant assumes responsibility for versus the owner.

Gross Leases for Commercial Properties

In contrast to the net lease, a gross lease bundles the operating costs associated with a property in with the rent. For this reason, rents in a gross lease may be higher than in a net lease. Tenants may appreciate the stability of their monthly cash flows with a full service gross lease. In a modified gross lease, monthly payments remain consistent, but landlords reserve the right to adjust operating costs after one year to ensure their costs do not become imbalanced relative to the actual costs.

This information is not intended to provide legal advice but is instead meant to provide business and commercial property owners in Mississippi with an overview of some of the different types of commercial property leases they may utilize.