Encyclopedia
Gross lease
A lease where the rent includes most building costs. The tenant pays one amount.
For example: A small office tenant likes the predictability of a gross lease even if the rent looks higher. (Illustration only, not a real deal.)
This is a general industry term with no single official definition. Your lease or contract wording controls.
Example only, not a real client. Say you lease a small office where the rent includes property tax and building costs. Budgeting is simple. When we compare it with a net-lease office nearby, we add that space’s estimated costs to its base rent so you are comparing the same thing.
What I’d tell a friend
A gross lease makes budgeting easier, but compare it on total cost with net-lease options before you decide.
Why it matters to you
You know your cost up front, but the landlord builds expected costs into the rent. Compare it with net offers on total cost.
How to use it in your deal
Tenants get simpler budgeting with a gross lease, but the landlord usually builds expected costs into the rent, so compare the total cost with net lease options. Check what's included: utilities, janitorial, repairs, and whether there's an escalation if taxes or costs rise. Some "gross" leases still pass through increases over a base year, which makes them modified gross.
Landlords take on the risk of rising costs, so they often set higher rents or add escalation clauses. Ask who handles repairs inside your unit and who pays for heating, ventilation and air conditioning (HVAC). Make sure the lease spells out exactly which costs the landlord covers. Buyers should look at gross leases carefully, since rising costs reduce net income.
When comparing listings, convert everything to total occupancy cost per square foot per year so a gross rate isn't compared with a net rate. If the landlord's cost assumptions are stale, the rent may not cover costs and the landlord may push hard at renewal.
Mistakes I see
Comparing gross rent with net rent. Missing escalation clauses. Unclear repair responsibilities.
In BC and Vancouver
Lease terms govern; the Commercial Tenancy Act applies to commercial tenancies in BC.
Official sources: Commercial Tenancy Act (BC Laws)
What the rent covers
In a gross lease, the landlord pays most building costs, such as property tax, insurance and maintenance, out of the rent. Your monthly payment is more predictable, which helps a small business plan.
Landlords build expected costs into the rent, so a gross rent usually looks higher than a net rent for similar space. The useful comparison is total cost.
Increases to watch
Many gross leases still pass on increases above a base year, or include set rent steps. Read how increases work, since that is where a gross lease can start to behave like a net one.
Check what is excluded, such as your own utilities, janitorial service, repairs inside your space or after-hours heating and cooling.
Questions to ask before you sign
- What costs are included?
- Are there escalations?
- Who handles repairs?
- How does total cost compare?
Keep reading
Related terms: Net lease, Modified gross lease, Base year
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General information for British Columbia only. It isn’t legal, tax, accounting or financial advice, laws and rates change, and reading it doesn’t make you my client. Any numbers or scenarios are hypothetical. Check the linked official source and talk to a lawyer, accountant or other qualified professional before you act or sign anything. See the terms and disclaimer.