A type of lease structure where the landlord (lessor) covers all of the operating costs related to running the real estate property, up to a specified limit. This usually includes operating expenses such as common area maintenance, utilities, property taxes and insurance. It entails that the tenant (lessee) pays a base rent that would cover specific types of such expenses if contractually agreed.
The landlord is responsible to pay expenses up to an upper bound called an expense stop or an expense ceiling, representing a limit on the total amount of expenses that the landlord would cover. Any expenses above that limit will be passed on to the tenant.
Full-service leases are commonplace where there are multiple tenants in a real estate unit, like an office lease. It might not practical for the landlord to figure out each and every tenant individually. Therefore, the landlord would rather choose to cover these expenses and to charge a base rent that account for these costs.
It is also referred to as a full-service lease or a gross lease.
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