What is the difference between net and gross commercial property leases?
Before I explain the difference, people should understand that there are basically two components to the total cost of rent: the base rent and then the operating expenses. Base rent is the fee the landlord charges for the space itself, and the operating expenses include expenses such as property taxes, insurance, and property maintenance.
Is a net or gross lease better than the other?
It depends, landlords may sometimes prefer net leases where the operating expenses are not included in the base rent, because it protects them better against increases in taxes, insurance premiums, and maintenance.
With gross leases, where expenses are included, who bears the cost of unexpected operating expenses that exceed what the landlord anticipated?
Unless the lease agreement specifically deals with this issue the landlord would likely need to take responsibility for any additional costs associated with property ownership in a gross lease, which includes unanticipated costs like maintenance issues or rising utility bills.
