Understanding Lease Types

In a full-service lease, the landlord assumes the responsibility for most or all of the operating expenses associated with the property. This typically includes costs such as property taxes, insurance, maintenance, utilities, and janitorial services. Tenants pay a fixed rental rate that encompasses these operating expenses, providing them with a predictable budgeting frameworkfor their occupying costs.. Full-service leases are often utilized in office buildings and some commercial properties, where landlords seek to attract tenants by offering a hassle-free leasing experience.  Landlords typically pass through increases in the operating expenses and taxes in excess over the first year of the lease term.

Conversely, in a gross lease, the tenant pays a fixed rental amount, and the landlord covers all operating expenses, including property taxes, insurance, utilities, maintenance, and other associated costs. This simplifies the tenant's financial obligations, as they only need to budget for the fixed rent amount without concerns about additional expenses. Gross leases are commonly found in  some commercial leases, particularly for smaller office spaces or retail properties.

On the other hand, a triple net lease places the responsibility for paying the base rent plus all three "nets" - property taxes, insurance, and maintenance costs - squarely on the tenant. This type of lease shifts more of the operating expenses onto the tenant compared to gross or full-service leases. Triple net leases are prevalent in commercial real estate, especially for freestanding retail properties, industrial buildings, and some office spaces. They offer landlords the advantage of predictable net rental income while transferring the responsibility for property expenses to the tenant, often shifting more control over the property's management and maintenance.