What is the primary difference between a gross lease and a net lease in commercial real estate?
Correct Answer
C) In a gross lease, the tenant pays a base rent and the landlord pays operating expenses
In a gross lease, the tenant pays only the base rent while the landlord is responsible for operating expenses such as property taxes, insurance, and maintenance. This is the opposite of a net lease where the tenant pays operating expenses in addition to base rent.
Why This Is the Correct Answer
Option C correctly defines a gross lease structure where the tenant's obligation is limited to paying base rent while the landlord assumes responsibility for all operating expenses including property taxes, insurance, maintenance, and utilities. This arrangement provides cost certainty for tenants as they know their exact occupancy costs upfront. The gross lease structure is commonly used in office buildings and retail spaces where landlords prefer to maintain control over property operations and expenses while providing tenants with predictable monthly payments.
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