What is a Gross Lease?
A gross lease is a type of lease that requires the tenant to pay one flat fee to the landlord to rent a given space.
Rather than the tenant paying additional fees, the owner designs the rental amount to cover all operating expenses. These expenses generally include property taxes, insurance, and utilities, but the tenant could negotiate to have additional services such as cleaning included.
In commercial real estate, there are several types of leases to choose from, depending on the property you own. Each variety of lease affects how your tenant-landlord relationship functions, so it’s best to consider all your options before making a choice.
Types of Gross Leases
While all gross leases are similar, they fall into two general categories: modified gross and full service.
A full service lease, as described above, includes all operating expenses in a flat rental amount. The tenant is not responsible for additional charges outside of their weekly, monthly, or yearly fee.
Alternatively, a modified gross lease is tailored to the landlord’s needs. In this scenario, the rental amount may include property taxes and insurance but not utilities. A modified gross lease combines a gross lease and a net lease (where the tenant is responsible for operating expenses).
Pros and Cons
Before deciding on a gross lease, it’s essential to understand the pros and cons. On the upside, a gross lease allows the landlord to collect a higher rental amount and pass along operating expenses to the tenant, especially as costs increase over time.
On the other hand, a gross lease requires more attention from the property owner as they are in charge of ensuring maintenance is taken care of, and bills are paid.
Be sure to partner with a real estate professional to help you decipher which type of lease is best for you and your property. Please contact Steve Longenecker at WeBrokerCORealEstate or 720-600-9513 regarding any commercial real estate needs in Longmont, CO, and our neighboring communities.
We give out $250 gift cards for referrals that become our real estate clients.
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