The Four Types of Leases

A gross lease is most common for commercial properties such as offices and retail spaces. There are two sub-types of gross leases: a modified service and a full service. A modified gross lease allows people such as the landlord and the renters to negotiate which utilities will be covered by each party. A full-service lease is where a tenant pays a flat fee, and the landlord is responsible for paying all incidental costs out of that rent. 

A net lease is the opposite of a gross lease and instead, the renter pays both a fixed rent to the landlord as well as all incidental costs. This type of lease is also common for commercial properties and for owners who do not want the responsibility of paying incidentals or taking care of the property. There are three subtypes of net leases: single net leases, double net leases, and triple net leases which refer to the number of expense categories the renter is covering. The expense categories include taxes, maintenance, and insurance. 

A variable lease is a lease that changes according to certain conditions. There are two subtypes of variable leases: index leases and graduated leases. An index lease ties the amount of the rent to an index of some kind. This means that a renter in a large urban center may negotiate a yearly rent review based on the average office rent in the city. In a graduated lease, the rent amount increases according to a pre-determined schedule. In this situation, a renter may negotiate a yearly increase of 3% to be charged each August.