Understanding Gross vs. Triple Net Commercial Leases

 Posted on June 23, 2025 in Real Estate Transactions

Whether you are launching a new business or expanding an existing one, the type of commercial lease you sign can have a lasting effect on your costs, responsibilities, and financial stability. In Illinois, especially in growing markets like Aurora, two of the most common types of leases are Gross Leases and Triple Net (NNN) Leases. Understanding the differences between them and how tenant improvements (TIs) are handled can help you make informed decisions before you sign. Let our Kendall County commercial real estate lawyer help.

What Is a Triple Net (NNN) Lease?

A Triple Net Lease, or NNN lease, is structured so that the tenant pays not only base rent but also three major operating expenses: property taxes, property insurance, and common area maintenance (CAM). This arrangement allows landlords to pass through the majority of ongoing property costs directly to tenants.

For landlords, NNN leases offer the benefit of predictable net income and fewer property management responsibilities. However, for tenants, these leases require careful budgeting. Monthly payments may fluctuate due to changes in tax assessments or maintenance costs. Tenants must be prepared for variable expenses and should review past CAM statements to assess potential volatility. These types of leases are especially common in retail spaces such as shopping centers and standalone buildings.

What Is a Gross Lease?

A Gross Lease, sometimes called a full-service lease, includes most or all of the building’s operating expenses in the monthly rent. The landlord is responsible for paying taxes, insurance, and maintenance costs, and typically builds those anticipated expenses into the rental rate.

For tenants, the major advantage of a Gross Lease is predictability. The monthly rent remains steady, making it easier to budget for occupancy costs. On the other hand, the rent is often higher compared to NNN leases because it includes the landlord’s estimated costs. Tenants also have less visibility into how those expenses are calculated. Gross leases are more common in office buildings or multi-tenant spaces where services and utilities are shared.

How Do Tenant Improvements (TIs) Affect Commercial Leases?

Tenant Improvements refer to any modifications made to a leased commercial space to accommodate the specific needs of the tenant’s business. These may include building new interior walls, upgrading lighting and flooring, modifying plumbing or HVAC systems, or improving kitchen and bathroom facilities.

In competitive markets where businesses often renovate older spaces or build out new ones, TIs are a central part of lease negotiations. Who pays for these improvements can vary significantly depending on the lease structure. In many Gross Leases, landlords may provide a tenant improvement allowance, which is a set amount of money to cover the cost of modifications. In NNN leases, tenants are often responsible for their own improvements, though some landlords may offer incentives such as rent credits or a rent-free period to offset the cost.

It is essential to negotiate the scope, cost-sharing, and approval process for tenant improvements in writing before signing a lease. This helps prevent disputes later and ensures that the work is completed to both parties’ satisfaction.

Why Lease Terms Matter for Your Business

Signing a commercial lease is not just about finding the right location; it is about committing to a binding legal and financial agreement under Illinois law 765 ILCS 705 that will shape your business’s operations for years to come. Both Gross and NNN leases have advantages and trade-offs. The best choice depends on your budget, risk tolerance, and the specific terms negotiated in your lease.

Before entering any lease agreement, take time to understand the full financial picture—including base rent, additional costs, and tenant responsibilities. This is especially important in suburban Illinois, where local real estate conditions and landlord expectations can vary widely.

Contact an Oswego, IL Commercial Lease Attorney

Commercial lease agreements are complex and carry long-term implications for your business. At Gateville Law Firm, our Kendall County, IL business law attorney helps business owners, commercial landlords, and tenants navigate their leases with clarity and confidence.

Whether you are reviewing a new lease or renegotiating existing terms, our team will work to protect your interests and reduce your risk. Call 630-780-1034 to schedule a free initial consultation.