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Gross Lease vs. Net Lease: What's the Difference?

Who pays the taxes, insurance, and maintenance — and why it changes your real rent.

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

In a gross lease, the tenant pays a single flat rent and the landlord covers operating costs like property taxes, building insurance, and maintenance. In a net lease, the tenant pays a lower base rent plus some or all of those operating costs on top.

How a gross lease works

A gross lease (sometimes called a "full-service" lease) bundles the landlord's operating expenses into one rent number. The tenant gets predictability — one payment, few surprises — while the landlord bears the risk that taxes, insurance, or repair costs rise during the term. Landlords typically price that risk into a higher base rent, and many gross leases include an "expense stop" or base-year clause so that increases above a set level get passed through anyway.

How a net lease works

A net lease shifts operating costs to the tenant. The three costs usually "netted" to the tenant are property taxes, insurance, and common area maintenance. Depending on how many of those the tenant absorbs, the lease is described as a single net, double net, or triple net (NNN) lease. Net leases are common for freestanding retail, industrial space, and single-tenant buildings.

Which is better for a landlord or a business tenant?

Neither is inherently better — it is a question of who should carry cost risk and how the base rent is priced. A gross lease is simpler for a tenant to budget; a net lease gives the landlord a more predictable net return and often a lower headline rent. What matters most is that the lease clearly defines which expenses are included, how pass-throughs are calculated, and what the tenant can audit. A middle-ground option, the modified gross lease, splits the difference.

How Nochumson P.C. helps

Nochumson P.C. drafts, reviews, and negotiates commercial leases for Philadelphia-area landlords, investors, and business tenants — making sure the rent structure and expense definitions actually match the deal you agreed to. Contact us to review your lease.

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