Commercial Property Management - Full-Service versus Gross Lease

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Information about Commercial Property Management - Full-Service versus Gross Lease
Real Estate

Published on March 6, 2014

Author: MurrayStephens


By Murray Stephens

Introduction  Owner of Stephens Global, LLC, Murray Stephens manages commercial properties throughout seven states. Headquartered in Baltimore, Murray Stephens’ company arranges contracts with various businesses to offer property services. In commercial real estate, there are various types of leases a tenant and property management company can execute, such as a gross lease or full-service lease, both of which hold the landlord responsible for repairs and maintenance of the facility. While the terms “gross” and “full-service” are often used interchangeably, the costs associated with each can make a significant difference to a tenant.

About Commercial Leases  When entering a gross commercial lease, the landlord is liable for the timely payment of operating expenses, including insurance and taxes. The landlord further agrees on a set rate to be paid by the tenant for the duration of the lease. Any additional expenses incurred due to inflation will not affect the tenant’s rate.

Conclusion  Conversely, operating expense increases will affect a tenant’s rate in a full-service agreement. The lease will include a stipulation that the base year determines the increase in the tenant’s rate as prices and fees escalate. The base year is not necessarily the first year under contract and is decided upon by the landlord.

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