How does a gross lease differ from a net lease?

A gross lease and a net lease represent two differing approaches to allocating property expenses between landlords and tenants. In a gross lease, the landlord pays for all operating expenses of the property, which typically include taxes, insurance, maintenance, and utilities, as part of the rent. This arrangement provides simplicity for tenants, as they only need to pay a fixed monthly rent without worrying about fluctuating costs associated with property management.

In contrast, a net lease shifts some or all of these expenses to the tenant, meaning that the tenant is responsible for variable costs in addition to their base rent. This structure can benefit landlords by providing a more predictable income and minimizing their financial risk related to property management costs.

The other options do not accurately represent the distinctions between these lease types. For instance, a gross lease does not necessarily correlate with a higher rent compared to a net lease, as rental rates can vary widely based on market conditions and property specifics. Additionally, net leases can be applied to various property types, including commercial and industrial real estate, not just residential. Finally, while net leases may require specific documentation to outline the expense responsibilities, this does not universally imply that they require more documentation than gross leases, as this can depend on the specific terms and the involved parties.