A gross lease charges the tenant one rent figure that covers the space and the landlord's operating costs: taxes, insurance, maintenance, and often utilities and janitorial. The landlord pays the costs from the rent and carries the risk that they rise. Most office gross leases add a base year clause that passes increases above the first year to the tenant.
A gross lease is the simplest commercial lease to read and the hardest to price. The tenant pays one number. The landlord pays the property's costs out of it and keeps what is left. Cornell's Legal Information Institute and Wikipedia describe the structure.
Gross, modified gross, and base year
Pure gross leases with no pass-throughs are now uncommon for terms longer than a few years, because the landlord absorbs every cost increase. Two mechanisms restore balance. The modified gross lease carves specific costs, often utilities or janitorial, back to the tenant. The base year clause, or its cousin the expense stop, keeps the gross structure but makes the tenant pay its share of operating cost increases above a fixed level.
| Structure | Landlord pays | Tenant pays |
|---|---|---|
| Pure gross | All operating costs, all years | Rent only |
| Gross with base year | Costs up to the base year level | Rent plus share of increases above base year |
| Modified gross | Most costs | Rent plus named categories |
| Triple net | Little beyond structure | Rent plus taxes, insurance, CAM |
What lease administration tracks
Even a gross lease generates work. The base year amount has to be established and, in a multi-tenant building, grossed up to reflect full occupancy so the tenant's future share is fair. Annual increases have to be calculated and billed. Included services and their hours have to be honoured and after-hours use charged. The escalation clause that steps the rent each year is tracked separately from the operating cost pass-through.
Reading a gross lease
Confirm what the rent includes, whether there is a base year or expense stop, how the base year is grossed up, and which services are excluded. A lease called gross with a low base year and a long exclusion list behaves much like a net lease by year three.
Related terms
Frequently asked questions
What is a full service gross lease?
A gross lease where rent also covers services inside the premises, typically utilities, janitorial, and sometimes parking. Common in multi-tenant office buildings where the landlord runs the systems and bills one number. The lease still defines which services are included and the hours they are provided.
How does a base year work in a gross lease?
The landlord pays operating costs up to the level of the first lease year, the base year. In later years the tenant pays its share of any increase above that amount. It keeps the single-rent simplicity while protecting the landlord from cost inflation over a long term.
Is a gross lease better for the tenant?
It is more predictable: one number, no reconciliation surprises. It is usually priced higher than a net lease on the same space because the landlord builds expected costs and a risk margin into rent. Tenants with short terms or small suites often prefer it; large tenants often prefer net structures with audit rights.