What is a Gross Lease?
In this type of lease the tenant pays the landlord a gross amount for rent, plus sales tax where applicable. The landlord then pays the property’s operating expenses such as property taxes, insurance, management or maintenance costs from the income they receive. The Tenant may be responsible for electric, telephone, and possibly water & sewer charges depending on the verbiage of the lease document. In addition, a CAM, common area charge, may be assessed to alleviate the cost associated with maintaining the property or public utilities paid by the landlord. With some gross leases, the landlord may put an expense stop provision in the lease. In this type of clause the tenant pays the excess over a specified ceiling on operating costs. For example, the owner of an office building may require tenants to pay for heating and air conditioning if costs exceed $1.25 per square foot as well as any increases in taxes over the base year.
