In general, there are four commonly used types of commercial office leases. The following are examples of four types of office leases commonly used in commercial leases:
Gross Lease With a Base Year. In these leases the building’s operating expenses and taxes have make up the base year. These operating expenses and taxes serve as a base line, with percentage increases built in for each year of the lease. Thus, the commercial real estate tenant’s obligation to pay rent increases over the base year operating expenses. These additional costs are often called “additional rent.”
Gross Lease With Expense Stop. In these leases, the commercial real estate tenant pays a gross base rent that includes expenses and taxes for the first year of the lease. The landlord and tenant agree upon a negotiated “stop”, which is the set amount of rent allocated to expenses and taxes during the first year. For the remaining years of the lease, the tenant is responsible for paying expenses and taxes that exceed the negotiated stop for the first year rent.
Full Gross Lease. In this type of the lease the tenant only pays base rent, no additional rent. The base rent stated in the lease would include the landlord’s estimate of all operating expenses and taxes.
Net Lease. In this type of commercial real estate lease, the tenant pays all of its proportionate share of the operating expenses and taxes for the building. In other words, the taxes and expenses are passed through to the tenant.