Gross Lease
In a gross lease, the landlord pays property taxes, insurance, and maintenance out of collected rent, and the tenant pays a single flat rent figure — the opposite of a triple net lease. A modified gross lease splits the difference: the tenant typically reimburses some expenses, often increases over a base year, while the landlord retains others.
Because the landlord absorbs operating costs, gross-leased buildings carry higher operating expense ratios than NNN properties, and NOI is more sensitive to expense inflation — a spike in insurance or utilities falls directly on the owner rather than passing through to tenants.
Gross and modified gross structures are typical in multifamily and traditional office leasing, where itemized per-tenant expense reimbursement would be administratively impractical or simply doesn't match market-quoting norms. Lenders re-underwrite gross-leased NOI more conservatively, since expense growth isn't contractually capped for the owner.
A tenant paying $30 per square foot on a full gross lease writes one check, and the landlord funds taxes, insurance and maintenance out of it. Under a modified gross lease with a base year, that same tenant pays $30 plus its pro-rata share of expense increases above the base-year level.
Frequently asked questions
What is a gross lease in real estate?
In a gross lease the tenant pays a single flat rent figure and the landlord covers property taxes, insurance and maintenance out of that rent. It is the opposite of a triple net lease, where the tenant pays those three costs directly on top of base rent.
What is a modified gross lease?
A modified gross lease splits operating costs between the parties. The tenant typically pays a flat rent covering a base year of expenses, then reimburses its share of increases above that base year, while the landlord retains certain costs outright — often structural repairs, and sometimes property taxes.
What is an industrial gross lease?
An industrial gross lease is the modified gross structure applied to multi-tenant industrial buildings: the tenant pays base rent plus a pro-rata share of specified costs such as utilities and common area maintenance, while the landlord keeps the rest. What each side covers varies by building, so the expense schedule matters more than the label.
Is gross rent the same as a gross lease?
No. Gross rent is the total rent a property collects before operating expenses are deducted — a line on the income statement. A gross lease is the contract structure deciding who pays those expenses. A property reports gross rent whether its leases are gross, modified gross or net.