What is a Full Service Gross Lease?

A gross lease is a leasing agreement where the tenant is responsible for operating costs related to the property. Gross leases are common in the real estate industry and are usually presented as an alternative to a net lease. A gross lease means that tenants pay for their own expenses directly rather than through their rent. The tenant also has direct possession of the property, not leasing it from another entity. A full service gross lease arrangement includes three or more of the following services: cleaning, maintenance, utilities, repairs, management, accounting, and insurance. To learn more about full service gross leases read our article below.

What is a Full Service Gross Lease?

A full service gross lease is a leasing agreement where the tenant is responsible for operating costs related to the property. A full service gross lease arrangement includes three or more of the following services: cleaning, maintenance, utilities, repairs, management, accounting, and insurance. Gross leases are common in the real estate industry and are usually presented as an alternative to a net lease. A gross lease means that tenants pay for their own expenses directly rather than through their rent. The tenant also has direct possession of the property, not leasing it from another entity. A full service gross lease arrangement includes three or more of the following services: cleaning, maintenance, utilities, repairs, management, accounting, and insurance. Full service gross leases are common in commercial leasing, especially among retail and restaurant tenants.

Why Are Full Service Gross Leases Used?

Full service gross leases are used by landlords as a way to reduce their risk in the marketplace. On a gross lease, landlords are responsible only for the property itself and not for any other costs or expenses. They can also choose to exercise control over these services and provide them themselves if they want to retain control over that aspect of the lease. Full service gross leases are common with retail and food service tenants because these types of businesses require more continuous and direct attention. Providing full service gross lease arrangements for retail and food service tenants can result in higher occupancy rates and lower overall risk for the landlord.

Full Service Gross Lease Differences

The main difference between a gross lease and a net lease is that the tenant pays their own expenses and the landlord is not responsible for them. In a gross lease, the landlord provides some or all of the services that the tenant would normally expect to hire third parties to provide. A gross lease may include any or all of the following: maintenance, cleaning, utilities, repairs, management, accounting, and insurance. A net lease, on the other hand, means the tenant pays a reduced rent that is offset by those services. A net lease only means the tenant pays for the rent, and nothing more. Full service gross leases are the most expensive of all leasing arrangements because the landlord is providing services that he or she would normally pay other parties to perform. For example, if the tenant leases a retail space and the landlord cleans the premises, the landlord is incurring extra time and expense to do so. This may make the retail lease more expensive for the tenant than leasing a space from a landlord who uses a net lease.

Drawbacks to a Full Service Gross Lease

One drawback to a full service gross lease is that the tenant may find that their costs are much higher than they would be with a net lease. For example, if the landlord cleans the premises and then charges the tenant for that service, the tenant must pay both the full rent and the cleaning fee. The tenant may find a lower cost alternative to the cleaning services. Some landlords may not use good cleaning practices, and this may cause the tenant to lose customers or face legal action due to unclean premises. If the landlord regularly cleans the premises but charges the tenant directly, the tenant can’t dispute the amount or services provided. Another drawback to a full service gross lease is that the landlord may not provide the services that the tenant wants or needs. For example, if the tenant needs a janitor to clean the premises after business hours, the landlord may not provide this service. In this situation, the tenant is responsible for cleaning the premises after hours. If the tenant does not have staff on premises after hours, the tenant may lose business.

Key Takeaway

Full service gross leases are the most expensive type of lease because the landlord is providing services that he or she would normally pay other parties to perform. A full service gross lease is a leasing agreement where the tenant is responsible for operating costs related to the property. For example, if the tenant leases a retail space and the landlord cleans the premises, the landlord is incurring extra time and expense to do so. This may make the retail lease more expensive for the tenant than leasing a space from a landlord who uses a net lease.