Legal Definitions - gross lease

A gross lease is a type of commercial rental agreement where the tenant pays a single, fixed amount of rent periodically (e.g., monthly), and the landlord is responsible for most or all of the property's operating expenses.

Under a gross lease, the landlord typically covers costs such as property taxes, building insurance, maintenance of common areas, and sometimes even utilities. This arrangement provides the tenant with predictable occupancy costs, as their rent payment remains consistent regardless of fluctuations in these underlying expenses. While the rent amount in a gross lease might be higher than the base rent in other lease types, it simplifies budgeting for the tenant by consolidating many property-related costs into one payment. The specific expenses included can be negotiated between the landlord and tenant, and some gross leases may include provisions where the tenant contributes to expenses only if they exceed a certain agreed-upon threshold.

• Example 1: Small Office Space

  A new tech startup, "Innovate Solutions," leases a 1,500 square foot office in a downtown building. They agree to a gross lease where they pay a flat $4,000 per month. This monthly payment covers not only the use of the space but also the building's property taxes, insurance, common area cleaning, and even their electricity and water bills. Innovate Solutions appreciates this arrangement because it allows them to budget precisely for their office costs without worrying about unexpected increases in utility rates or property tax assessments.

• Example 2: Retail Boutique in a Strip Mall

  "Chic Threads," a women's clothing boutique, rents a storefront in a local strip mall under a gross lease agreement. Their monthly rent is $3,500. The landlord uses this rent to cover the property taxes for the entire mall, the building's insurance policy, and all exterior maintenance, including landscaping, parking lot repairs, and roof upkeep. The owner of Chic Threads benefits from this structure because they don't have to deal with separate bills for these fluctuating property expenses, allowing them to focus solely on their retail operations.

• Example 3: Warehouse Unit with Utilities Separate

  A small distribution company, "Global Logistics," leases a 3,000 square foot warehouse unit. They enter into a modified gross lease where they pay a fixed rent of $2,800 per month. In this specific agreement, the landlord covers the property taxes, building insurance, and exterior structural maintenance of the warehouse. However, Global Logistics is responsible for paying for their own utilities (electricity and gas for their unit) and any interior repairs specific to their leased space. This still qualifies as a gross lease because the major, often unpredictable, property-level expenses like taxes and insurance are absorbed by the landlord within the fixed rent, providing significant cost predictability for Global Logistics.