Net Lease

In a commercial real estate, a net lease requires the tenant to pay, in addition to rent, some or all of the property expenses that normally would be paid by the property owner (known as the "landlord" or "lessor"). These include expenses such as real estate taxes, insurance, maintenance, repairs, utilities, and other items.

The precise items that are to be paid by the tenant are usually specified in a written lease. For properties that are leased by more than one tenant, such as a shopping center, the expenses that are "passed through" to the tenants are usually pro-rated among the tenants based on the size (square footage) of the area occupied by each tenant. The term "net lease" is distinguished from the term "gross lease". In a net lease, the property owner receives the rent "net" after the expenses that are to be passed through to tenants are paid. In a gross lease, the tenant pays a gross amount of rent, which the landlord can use to pay expenses or in any other way as the landlord sees fit.