The manner in which rent is determined indicates the type of lease that exists. There are three basic types of leases:
Gross Lease
In a gross lease, the Tenant pays a fixed rent, and the Landlord pays all taxes, insurance, repairs, utilities, etc., connected with the property (usually called property charges or operating expenses).
THIS IS TYPICALLY THE TYPE OF RENT STRUCTURE INVOLVED IN APARTMENT RENTALS.
 Net Lease
In a net lease, the Tenant pays a base rent and all or some of the property charges, depending on whether they are a single Tenant in the building or one of many Tenants in a building. The monthly base rental is net income for the Landlord after operating costs have been paid by the Tenants, not including debt service. Leases for entire commercial or industrial buildings and the land on which they are located, ground leases, and long-term leases, are usually net leases.
In a triple-net lease, or net-net-net lease, the Tenant pays all operating and other expenses in addition to the base rent. These expenses include:
Percentage Lease
Either a gross lease or a net lease may be a percentage lease. The rent is based on a minimum fixed rental fee – base rent – plus a percentage of the annual gross income received by the Tenant doing business on the leased property. This type of lease is used for retail businesses and restaurants. The percentage charged is negotiable and varies depending on the nature of the business, the location of the property, and general economic conditions. It is usually calculated at the end of the year and is payable in one payment.
Variable Lease
Several types of leases allow for increases in the base rent during the lease periods. One of the more common is the graduated lease, which provides for specified base rent increases at set future dates. Another is the index lease, which allows the base rent to be increased or decreased periodically, in relation to changes in the consumer price index or some other indicator.
Ground Lease
When a Landowner leases unimproved land to a Tenant who agrees to erect a building on the land, the lease is usually referred to as a ground lease. Ground leases usually involve separate Ownership of the land and buildings. These leases must be for a long enough term to make the transaction desirable to the Tenant investing in the building and often run for terms of 50 years up to 99 years. Ground leases are generally net leases. The lessee must pay rent on the ground as well as Real Estate taxes, insurance, upkeep, and repairs.
