What is the primary difference between a gross lease and a net lease?

The distinction between gross and net leases is fundamental to commercial real estate practice and directly impacts financial analysis, property valuation, and tenant negotiations. This question tests understanding of lease structure fundamentals that affect cash flow projections, operating expense budgets, and investment returns. In gross leases, landlords absorb operating expenses but typically charge higher base rent to compensate, creating predictable costs for tenants but variable income for landlords. Net leases transfer expense responsibility to tenants, creating lower base rents but variable total occupancy costs. This concept connects to broader principles of risk allocation, property management responsibilities, and investment analysis. Understanding these structures is essential for proper lease negotiation, financial modeling, and advising clients on occupancy strategies.