Compared with a net lease, a gross lease generally has a higher base rent because the landlord pays most expenses. Which option best completes this statement?

• A. Higher
• B. Lower
• C. Similar
• D. Not Defined

Answer: (A)

The key idea is how who pays operating expenses affects the base rent in a lease. In a gross lease, the landlord covers most expenses such as property taxes, insurance, maintenance, and sometimes utilities. To account for those costs, the base rent is set higher. In a net lease, the tenant pays some or all of those operating expenses, so the base rent can be lower since the ongoing costs aren’t fully included in rent. Therefore, when comparing to a net lease, a gross lease tends to have a higher base rent to reflect the landlord’s larger expense burden. The option that completes the statement as higher fits this pattern.