7.2 Types of Leases

Types of Leases

There are several types of lease arrangements, each with unique features and uses:

• Gross lease: The landlord pays all property operating expenses (utilities, repairs, maintenance); tenant pays only rent. Common for offices, industrial properties, and most residential leases (except utilities).
• Net lease: The tenant pays rent plus some or all property expenses (utilities, repairs, taxes, insurance). Common for office, industrial, and some single-family properties.
• Percentage lease: Tenant pays a base rent plus a percentage of gross sales. Used only for retail properties.
• Residential lease: Usually a gross lease (landlord pays most expenses except utilities/water). Shorter terms, standard clauses, and less negotiable than commercial leases.
• Commercial lease: May be net, gross, or percentage. Long-term, negotiable, and often involves tenant improvements and significant financial obligations.
• Ground lease (land lease): Tenant leases only the land, usually long-term (30–50 years), for agriculture, development, or separating land/improvement ownership.
• Proprietary lease: Used in cooperatives; grants occupancy rights to a co-op owner, with rent based on their share of expenses and term tied to co-op ownership.
• Leasing of rights: Leasing specific property rights (mineral, air, or water rights) rather than occupancy. For example, leasing mineral rights to a mining company or air rights to a railroad for a bridge.