Gross Lease
Sometimes called a "full service lease. The tenant a flat rental fee while the landlord pays for all or most expenses, such as property taxes, insurance, and the maintenance of the interior and exterior. The gross lease is the most common residential lease.
Net Leases
In a net lease, the landlord passes certain expenses to the tenant. There are two methods of this “pass thru”. The landlord may require the tenant to pay certain expenses like utilities, or the tenant may pay such expense and send an invoice to the tenant as ‘additional rent”. There are three types of net leases.
- N Lease—In a single net lease (N lease), tenants pay base rent and their share of property tax on the basis of a ratio of psf (per square foot) while the landlord pays all else.
- NN Lease—Tenants pay a base rent and their share of property taxes and insurance premiums. Typically, the landlord is still responsible for expenses related to structural repairs and common area maintenance (CAM).
- NNN Lease—Last but not least, for triple net leases (NNN lease), tenants pay a base rent plus (1) property tax, (2) property insurance and (3) CAM. NNN leases, named after the three "nets," property tax, insurance, and CAM, are the most popular type of net lease, and are frequently found in commercial buildings and retail spaces in the U.S. Along with base rent, tenants also usually pay for utilities and operating expenses. As a general rule of thumb, NNN leases tend to be more landlord-friendly.
Percentage Leases
In a percentage lease, which is often combined with a form of net lease, the tenant pays a base rent, with any net lease payments plus a percentage of sales receipts. It is not unusual for percent of sales to begin after a sales threshold is reached. This type of lease is common in retail and restaurant spaces.