Net vs Gross Lease in Ontario (and Triple Net)

In a gross lease, the tenant pays a single, all-inclusive rent and the landlord pays the property's operating costs, such as property taxes, building insurance, and maintenance; in a net lease, the tenant pays a lower base rent and also pays some or all of those operating costs on top. "Triple net" (often written NNN) is the most tenant-pays version of a net lease, where the tenant covers base rent plus the three main operating costs of property taxes, insurance, and maintenance. Net leases are common in Ontario commercial real estate, and the structure changes what a space really costs.

What is a gross lease?

In a gross lease, the tenant pays one rent figure and the landlord is responsible for the building's operating costs out of that rent. The tenant's budgeting is simple, because the rent is predictable and the landlord absorbs changes in taxes, insurance, and maintenance. Gross leases are more common in certain office and shorter-term arrangements, where tenants value a single, stable number.

What is a net lease (single, double, triple net)?

In a net lease, the tenant pays a base rent plus one or more of the property's operating costs, and the "net" label signals how many of those costs flow through to the tenant. A single net lease typically adds property taxes to the base rent; a double net lease typically adds taxes and building insurance; and a triple net lease adds taxes, insurance, and maintenance, including the common area costs often abbreviated as CAM. The more costs the tenant carries, the lower the base rent tends to be, because the tenant is taking on expenses the landlord would otherwise pay.

What does "triple net" (NNN) mean for a tenant?

A triple net lease shifts the three main operating costs onto the tenant, so the headline base rent is only part of the story. The tenant pays base rent plus its share of property taxes, insurance, and maintenance, and those additional amounts, commonly called TMI for taxes, maintenance, and insurance, can be substantial. A low base rent in a triple net lease can end up costing more than a higher gross rent once TMI is added, which is exactly the kind of comparison a commercial client needs help seeing.

Why does the lease structure matter to your client?

Because the lease type determines both the total cost and who bears the risk of rising costs. Under a gross lease, the landlord carries the risk that taxes or maintenance rise; under a triple net lease, the tenant does. A registrant who quotes only base rents can mislead a client without meaning to, so the useful habit is to compare leases on an effective, all-in basis rather than on base rent alone. Net, gross, and triple-net are commercial-practice conventions, not categories defined by statute, so there is no section to cite for them: the controlling document is the lease itself, and the cost split is whatever the lease says it is, which is why the lease must be read closely. Ontario's Commercial Tenancies Act governs commercial landlord and tenant relationships generally, but it does not define these lease types.

What does net vs gross look like in practice?

Suppose a client is choosing between two similar retail units, each about 2,000 square feet. Unit A is offered as a gross lease at 32 dollars per square foot. Unit B is offered as a triple net lease at 22 dollars per square foot of base rent, plus estimated TMI of 11 dollars per square foot. On Unit A, the annual cost is about 2,000 times 32, or 64,000 dollars. On Unit B, the effective rate is 22 plus 11, or 33 dollars per square foot, so about 2,000 times 33, or 66,000 dollars a year. The lower-base triple net unit is actually the more expensive of the two once TMI is included. These figures are illustrative, but the lesson is real: compare all-in, not base to base.

How does the commercial exam test lease structures?

Questions often give a base rent and some operating costs and ask which lease costs the client more, or ask you to identify what a tenant pays under a named structure. The trap is to compare base rents directly and ignore the operating costs that a net lease adds. Convert everything to an effective, all-in figure, and the comparison becomes clear.

How do you build commercial leasing fluency?

Commercial leasing rewards turning labels into dollars. ExamPass Simulation 2 practice puts lease scenarios in front of you with full explanations, and the AI Tutor can break down any structure into what the tenant actually pays. Related reading: capitalization rates and preparing for Simulation 2.

See courses and pricing · Simulation 2 exam prep

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