What Is Gross Lease vs. Net Lease?
A commercial lease defines who pays which expenses. The two poles of the spectrum are gross leases and net leases — and everything in between.
A commercial lease defines who pays which expenses. The two poles of the spectrum are gross leases and net leases — and everything in between.
In a gross lease (also called a full-service lease), the tenant pays a single flat rent and the landlord pays all operating expenses: property taxes, insurance, maintenance, utilities. This is common in office buildings where multiple tenants share a building and it’s impractical to separately meter utilities or apportion maintenance.
In a net lease, the tenant pays base rent plus some or all operating expenses. The word “net” tells you the landlord’s rent is “net” of expenses — the tenant picks up the costs. Three variants:
- Single Net (N): Tenant pays base rent + property taxes. Rare.
- Double Net (NN): Tenant pays base rent + property taxes + insurance. Common in older retail.
- Triple Net (NNN): Tenant pays base rent + property taxes + insurance + maintenance. The landlord’s preferred structure — maximum pass-through.
For an investor, NNN leases are attractive because the landlord’s expenses are predictable and the NOI is “clean.” A Walgreens NNN lease means the tenant pays for everything; the landlord deposits the check. A gross lease means every spike in property taxes, insurance, or HVAC costs eats directly into the landlord’s NOI.
Modified gross leases sit in the middle — landlord pays some expenses, tenant pays others, negotiated on a deal-by-deal basis. (Lease terms carry real legal weight; have an attorney review any lease before you rely on it.)
Learn this properly
Gross Lease vs. Net Lease is one of the core numbers in commercial real estate. The Language of CRE course teaches it alongside every other metric you need to read a deal, with worked examples and practice questions.
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Common questions
What is Gross Lease vs. Net Lease?
A commercial lease defines who pays which expenses. The two poles of the spectrum are gross leases and net leases — and everything in between.
Why does Gross Lease vs. Net Lease matter in a commercial real estate deal?
In a gross lease (also called a fullservice lease), the tenant pays a single flat rent and the landlord pays all operating expenses: property taxes, insurance, maintenance, utilities. This is common in office buildings where multiple tenants share a building and it’s impractical to separately meter utilities or apportion maintenance.
Related terms
[Gross Potential Income (GPI)](/gross-potential-income/) · [Gross Rent Multiplier (GRM)](/gross-rent-multiplier/)
Educational definition only. Not investment, financial, or brokerage advice.