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Web Articles
       Analysis of Commercial Gross Leases and
                                   Net Leases

The manner by which the owner of a commercial real estate
development collects sums from the tenants for the payment of
the operating expenses associated with that project is a
significant distinction upon which leases for commercial real
estate are broadly delineated.  There are basically two ways the
owner of a commercial real estate development can collect
sums from the tenants for the payment of such operating
expenses: either as a set amount that the tenant contributes to
those costs which is incorporated into the tenant’s periodic
rental payment or as a separate charge to the tenant which is
adjusted as the operational expenses that the tenants
contribute to change.  A leasing arrangement whereby the
tenant contributes a set amount to the operational costs of the
project is referred to as a
gross lease and a leasing
arrangement whereby the tenant’s contribution to the
operational costs of the project adjust as those operational
costs change is generally referred to as a
net lease.  However
the broad category of leases generally known as net leases is
comprised of many variations and permutations.  
What type of
lease will be used, a gross lease or a net lease, is dependant
upon numerous factors.

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