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a gross lease is a rental agreement
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where the tenant pays a single flat fee
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that covers rent and operating expenses
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knowing the different lease types and
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how they work in real estate is
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essential for passing the real estate
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exam so if you want to pass the real
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estate exam you're in the right place
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hello everybody it's Zach here from Real
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Estate licenswear.com today we're
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talking about gross leases in real
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estate let's get started so what is a
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gross lease a gross lease is a
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contractual agreement where the tenant
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pays one fee that covers rent and
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operating expenses this means the
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landlord is responsible for paying any
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of the property's additional expenses of
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course this can vary depending on the
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lease type and contract exact terms so
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examples of additional expenses included
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in a gross lease include property taxes
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property insurance maintenance costs and
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utilities why is it called a gross lease
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well the term gross means a total amount
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without any deductions of tax or other
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contributions a gross lease earns its
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name because tenants pay one price for
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rent without worrying about property
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taxes and other expenses so what are
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gross leases used for gross leases are
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generally used for commercial real
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estate commercial real estate refers to
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properties that leases rent for business
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use examples of properties that may be
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rented with a gross lease include Office
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Buildings warehouses assembly pants
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retail centers multiple tenants and even
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industrial properties now there are two
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types of gross leases that we do need to
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cover there's the modified gross lease
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and then there's the full service
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groceries so a modified gross lease is
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an agreement where the tenant pays base
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rent plus a proportional share of
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operating expenses in a modified gross
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lease agreement the property owner and
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tenant are both responsible for covering
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extra costs modified gross leases are
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the middle ground between a gross and a
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net lease because tenants pay extra for
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operational upkeep on a property the
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rent for a modified gross lease is often
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a little less this type of commercial
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lease is generally used for Office
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Buildings and spaces with multiple
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tenants now of course I did mention that
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full service gross lease or a fully
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service lease a full service lease is a
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rental agreement where the tenant only
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pays base rent the property owner pays
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all operating expenses including
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utilities maintenance insurance and
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property taxes full service gross leases
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provide tenants with one predictable
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bill to pay each month many tenants
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prefer this because they do not have to
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pay additional costs however landlords
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often charge higher rent prices on this
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type of lease to ensure they don't go
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broke paying property expenses so when
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should a modified growth lease be used
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versus one should a full service lease
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be used well tenants who are interested
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in paying less for rent may prefer
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signing a modified gross lease agreement
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while they still have to pay for a
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portion of the costs or other costs they
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can still have lowered these prices by
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using utilities less often in keeping
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their property well maintained tenants
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who are interested in paying one flat
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fee however like every month may prefer
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using a full service lease because this
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lease type only asks the tenant to pay
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for rent they never have to worry about
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changing prices due to variable cost us
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now what terms specifically are going to
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be on a gross lease well I'll put them
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on the screen for you obviously the
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names the terms the limitations deposits
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fees any restrictions that uh you know
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might occur things like that now there
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are some pros and cons of a gross lease
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for landlords who use gross leases they
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can charge higher prices for rent they
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also have the power to opt for energy
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saving equipment lowering the cost of
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operating expenses for tenants who sign
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gross leases they really only have to
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worry about making Grand payments they
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pay the same fixed fee every month with
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no surprises they also have fewer
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responsibilities as they do not worry
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about taxes insurance or maintenance
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something breaks in the property the
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landlord is required to fix it I'm going
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to put a quick table on the screen for
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you guys to check out if you want to
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read it you can pause but essentially it
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just outlines the pros and cons of each
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type of lease now there is an example
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that I really want to go over that I
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think helps outline this core concept so
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have you ever heard of co-working office
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spaces they are one of the best examples
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of when a tenant May sign a gross lease
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under this agreement tenants can rent
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out a desk or office space for one flat
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fee generally tenants in these
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conditions have access to amenities such
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as meeting rooms and free internet
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service in this case it makes sense to
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sign a gross lease as the tenant should
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not have to pay taxes and insurance for
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a property that they occupy with others
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another typical example of a gross lease
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in real estate is apartment buildings
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tenants can sign a lease for an
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apartment and pay the same rent price
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for the entire term of the lease so what
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is the difference then between a gross
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lease and a net lease well a gross lease
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requires Property Owners to pay
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operating expenses a net lease requires
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the tenants pay them the expenses the
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tenants pay for a net lease obviously
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depend on which type of lease agreement
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but again that's the big difference so
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then now you might be wondering when to
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use a gross lease versus when to use a
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net lease for a tenant a gross lease is
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typically the best option because the
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landlord pays for all the expenses
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belisi can make fixed payments without
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worrying about additional fees for a
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landlord however a net lease is
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generally the better choice the landlord
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is not responsible for utilities and
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other expenses in a net lease for this
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reason triple net Agreements are the
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least risky lease agreements for
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lisaurus now why are gross leases so
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popular well many businesses prefer to
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use gross leases because they simplify
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the accounting process with a gross
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lease structure business owners know
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exactly how much they will have to pay
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every month they can clearly account for
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this expense without worrying about
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extra costs like taxes and insurance so
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what do you need to know for the real
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estate exam about gross leases well you
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need to be familiar with the term and
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its definition a gross lease is a rental
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agreement where the leasee pays a fixed
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fee that covers rent plus operational
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costs related to a property this is one
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of those essential lease types that you
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just need to be familiar with for the
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exam the exam loves to ask you which
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type of lease this is and you need to
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understand which is which distinguish
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them and choose the correct answer
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hopefully now you understand what a
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gross lease is and you're one step
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closer to passing a real estate exam for
6:08
more videos on lease types and all that
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good stuff click here and click here to
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watching until next time see ya bye
