A gross lease is a type of commercial lease in which the landlord agrees to be responsible for all expenses which are normally associated with ownership of the leased premises, such as maintenance (including utilities and repairs), insurance, and taxes. A tenant to a gross lease is only responsible for paying the monthly lump sum base rent, while the landlord is responsible for operating the building and all other costs associated with the premises. The tenant's base rent usually includes the estimated building operating costs, meaning that the landlord is not really spending his own money to maintain and operate the building, but rather handling the regular allocation of the funds received through the lump sum rent. Gross leases are uncommon these days.
A modified gross lease is really a net lease disguised as a gross lease. Just like a normal gross lease, the tenant is responsible for paying the monthly lump sum base rent, while the landlord is responsible for operating the building and all other costs associated with the premises. However, the modified gross lease usually passes any increases in operating costs to the tenant by way of a pass through provision such as an operating expense escalation clause, which a normal gross lease does not do.
Commercial leases are very complex agreements with every provision open for negotiation. A real estate attorney will be able to inform you of whether a gross lease, a net lease or some type of hybrid is best for your business needs. Also, a real estate attorney will protect your interests when negotiating your commercial lease to ensure that the lease is the best lease possible for your business needs.
Last Modified: 07-08-2014 11:02 AM PDTLaw Library Disclaimer
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