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

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

• A. Gross lease: landlord pays most expenses; net lease: tenant pays some or all operating expenses
• B. Gross lease: tenant pays all expenses; net lease: landlord pays all operating expenses
• C. Gross lease: landlord pays none of the expenses; net lease: tenant pays all expenses
• D. Gross lease: tenant pays taxes; net lease: landlord pays taxes

Answer: (A)

The main idea is who pays the ongoing operating expenses in a lease, such as property taxes, insurance, and maintenance. In a gross lease, the landlord covers these expenses and the tenant pays a single rent payment. In a net lease, the tenant pays rent plus some or all of those operating expenses. The option reflects this standard distinction: a gross lease has the landlord paying most expenses, while a net lease shifts some or all of the operating costs to the tenant. There are also variations—double net or triple net leases—where the tenant specifically pays taxes and insurance, or taxes, insurance, and maintenance.

The main idea is who pays the ongoing operating expenses in a lease, such as property taxes, insurance, and maintenance. In a gross lease, the landlord covers these expenses and the tenant pays a single rent payment. In a net lease, the tenant pays rent plus some or all of those operating expenses.

The option reflects this standard distinction: a gross lease has the landlord paying most expenses, while a net lease shifts some or all of the operating costs to the tenant. There are also variations—double net or triple net leases—where the tenant specifically pays taxes and insurance, or taxes, insurance, and maintenance.