What is the main difference between a gross lease and a net lease?

The distinction between a gross lease and a net lease fundamentally revolves around the allocation of property expenses. In a gross lease arrangement, all property-related expenses—such as maintenance, property taxes, and insurance—are included in the rental payment made by the tenant. This means that the landlord absorbs these costs, providing the tenant with a predictable, all-inclusive monthly expense. This type of lease is typically favorable for tenants who wish to avoid variable costs associated with property ownership.

In contrast, a net lease requires tenants to take on some or all of these property expenses in addition to their base rent. This could include costs like utilities, property taxes, and maintenance fees, which can vary significantly over time, impacting the total cost of occupancy for the tenant.

Understanding this key difference clarifies the financial responsibilities associated with each leasing type and informs both tenants and landlords on what to expect in their leasing agreements. Other choices present alternative interpretations that do not accurately capture the primary distinction focused on expense liability. For instance, a gross lease can be long-term and applies to various property types, not just commercial.