What are the 4 types of leases?

The 4 Main Types of Leases You Should Know

When renting commercial or residential space, not all leases are created equal. Understanding the differences can save you money and prevent surprises down the road. There are four primary types of leases: gross lease, net lease, percentage lease, and variable lease.

A gross lease is one of the simplest arrangements. The tenant pays a flat monthly rate, and the landlord covers most operating expenses like property taxes, insurance, and maintenance. This type is common in residential leases and some office spaces, offering predictability for tenants.

On the other hand, a net lease shifts more financial responsibility to the tenant. Renters pay a base rent plus some or all of the property’s operating costs. Net leases come in variations—single, double, and triple net (NNN)—with each level adding more expenses (like utilities or repairs) onto the tenant.

Percentage leases are most often seen in retail settings. Here, the tenant pays a base rent plus a percentage of their gross sales. This setup benefits landlords when the business does well, aligning the success of the tenant with that of the property owner.

Finally, a variable lease adjusts rent based on changing factors—such as market conditions, inflation, or building performance. These are less common but offer flexibility in long-term agreements where fixed payments might not reflect actual value over time.

Choosing the right lease depends on your business model, industry, and risk tolerance. Whether you’re opening a storefront or leasing office space, knowing these four types helps you negotiate better terms and avoid unexpected costs.