Gross, net or gross plus? The lease that recovers everything is not always the one that suits you

General information only. Nothing here is legal, tax or financial advice. Check your own leases and your own position with your solicitor or accountant.

Most owners treat a net lease as the safe choice. The tenant pays the outgoings, so the rent you agree is the income you keep.

That is true on paper. In practice, a net lease is the most work to run, the hardest to negotiate line by line, and the one that gives you the least reason to keep costs down. A gross lease fixes all three and hands you the cost risk instead.

There is a third structure that most owners and most tenants do not fully understand. Gross plus. Could it be the best of both worlds?

This piece works through all three to answer that, with the numbers, what Queensland law allows on retail, and what to check in your own leases.

Net. The tenant pays a base rent plus its share of the building's outgoings. Rates, water, insurance, fire services, air conditioning maintenance, and so on. Your income tracks the rent. The tenant carries the cost movements.

Gross. The tenant pays one figure. You pay the outgoings out of it. Your income is whatever is left after the bills, so you carry the cost movements.

Gross plus. The tenant pays a gross rent that includes the outgoings as they stand in a fixed base year. Each year after, the tenant also pays any increase in outgoings above that base. The tenant signs on one number. You are protected if costs climb.

Market convention in South East Queensland roughly follows the asset class. Industrial and retail tend to be net. Office is often quoted gross or semi-gross. Convention is a starting point. The structure is a commercial decision, and it is yours to make.

A net lease is not set and forget. To recover outgoings properly you need, every year:

Every one of those steps is a point where a tenant can query a line. On a multi-tenant building that is a lot of administration, and the owner usually pays for it through the management fee.

The negotiation is harder too. Once outgoings are listed, every item becomes negotiable. We saw this on a recent renewal. The tenant was keen to stay and the rent was close to agreed. Then the conversation turned to the outgoings schedule, one item at a time. Could this one come out. Could that one be reduced. Could the insurance be requoted. Each item was its own small negotiation, and each concession changed the net outcome for the owner.

Talking in one clear gross figure takes most of that away. The tenant compares one number with the alternatives. The owner knows what it needs to net. There is one thing to agree.

This is the point owners rarely consider.

On a net lease, a saving on outgoings goes to the tenant. If you requote the insurance and save $2,000, the tenant's outgoings fall by $2,000 and your income does not move. If costs rise, the tenant pays. Either way, the owner has little financial reason to chase costs down.

On a gross or gross plus lease, the owner keeps the saving. Every dollar taken off insurance, rates objections, maintenance contracts or utilities is a dollar of net income, and at a 6 per cent yield a dollar of net income is worth about $17 of value.

Keeping outgoings down should be the aim on any lease. Tenants pay total occupancy cost, rent plus outgoings, whatever the structure. High outgoings on a net lease cap the rent you can achieve. Gross and gross plus make the owner the one who benefits most from doing the work.

Take a 200 sqm suite. Year one outgoings are $20,000, or $100/sqm.

In year one all three are identical. The tenant pays $80,000. You keep $60,000.

Now run five years. Every lease has 3.5 per cent fixed annual reviews. Assume outgoings grow at 7 per cent a year. That is an assumption, not a forecast. Insurance and rates have run well ahead of rent reviews in recent years, but use your own building's history.

Three things come out of that table.

Pure gross costs you. By year five the gross lease nets $65,586 against $68,851 on the net lease. That is $3,265 a year less income. At a 6 per cent yield, it is about $54,400 off the value of one suite.

Gross plus does not. The tenant pays the $6,216 of outgoings growth above the $20,000 base. Your net income is the gross rent less the base year, $91,802 less $20,000, or $71,802.

Gross plus can net more than net. The 3.5 per cent review applies to the whole gross figure, including the part that covers base year outgoings. The tenant still pays the cost growth on top. That is where the extra $2,951 a year comes from. A well advised tenant will notice this and may negotiate the review, so do not bank on it. It does show the structure costs the owner nothing against a net lease.

Gross plus is not widely understood, by owners or by tenants. In my experience the tenant focuses on the gross figure, because that is the number it compares with other premises. The plus rarely becomes the sticking point. What it does is protect the owner if outgoings escalate substantially, from an insurance shock, a rates revaluation or a new compliance cost.

The other advantage is administration. The tenant is not paying a share of every line. It pays one number for the increase in total outgoings over the base. There is still a reconciliation each year, but it is one calculation, not a schedule of disputed items.

My approach is not to carve anything out. The plus covers all outgoings the lease allows you to recover. Carving out items brings back the line by line negotiation that the gross figure was meant to remove.

Everything rests on the base year. If it is wrong, the protection is wrong for the whole term.

Set it carefully:

A thorough base year is the difference between a structure that protects you for the term and one that leaks from the first review.

If the tenancy is a retail shop under the Retail Shop Leases Act 1994 (Qld), the Act limits what you can recover, whichever structure you choose.

Check first whether the Act applies. Under section 5B, premises are a retail shop if they are in a retail shopping centre, or used wholly or predominantly for a retail business. Section 5A excludes, among others, shops with a floor area over 1,000 sqm.

Land tax is out. Section 7(3)(a) removes land tax from the definition of outgoings. Section 24(1) is a closed list of what a retail lease can require a tenant to pay, and the example under section 24 says a provision requiring the tenant to pay or reimburse the lessor's land tax is void. Deep dive 01 covers this in full.

This matters for gross plus. On a retail lease, the plus cannot include land tax increases. With land values up between 20 and 56 per cent in six councils this year, land tax is the outgoing most likely to escalate, and on retail you carry it on any structure.

Other exclusions apply too. Section 7(3) also excludes capital expenditure, contributions to a depreciation or sinking fund (subject to the limits in section 40), loss of profits insurance, insurance excesses, promotion fund contributions and interest on the lessor's borrowings.

The plus is an outgoings recovery, so the outgoings rules apply. A retail tenant is not liable for outgoings unless the lease specifies them and how they are worked out (sections 24 and 37). If the tenant pays any share of apportionable outgoings, including increases above a base year, the annual estimate and audit rules apply. Section 38A requires an estimate at least one month before the period starts. Section 38B requires an audited statement within three months after it ends. Section 38C lets the tenant withhold payments on account of outgoings until you provide them.

The share is capped by area. Section 38 limits the tenant's share to the area of its shop against the total area leased, occupied or available for lease. Vacant space counts, so you carry the vacant share.

Market reviews look at net. When a specialist retail valuer sets current market rent, one of the bases in section 29 is gross rent less the outgoings the tenant pays under the lease. Your structure feeds into the review outcome.

So on retail, gross plus still gives you one headline figure and protection on everything except land tax. It does not get you out of the estimate and audit cycle. For a single tenancy retail lease, a plain gross rent with reviews set to cover cost growth may be simpler. For a multi-tenant centre, a properly run net lease is usually the cleaner answer.

Outside the Act, the lease governs. You can define outgoings broadly, recover land tax where the lease allows it, and decide how the reconciliation works.

One check. Section 83A of the Land Tax Act 2010 stops land tax recovery under leases originally entered into between 1992 and 30 June 2009, whatever the lease says. Deep dive 01 sets out the dates. On a newer non-retail lease, gross plus with land tax in the base protects you against exactly the revaluation increases we covered in October.

Freedom cuts both ways. We take over buildings where the front page says net and the outgoings clause recovers rates and insurance only. The owner believes the lease is net. It is semi-gross by accident. Read the outgoings clause, not the heading.

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Antony Acutt is Managing Director of Altiera, a commercial buyers agency and asset management business in Brisbane, with more than 20 years in commercial property. Altiera manages commercial property across South East Queensland and buys on behalf of private investors.

Sources. Retail Shop Leases Act 1994 (Qld), in-force version as at 4 December 2025 on the Queensland legislation website: s 5A (exclusions, including floor area over 1,000 sqm), s 5B (meaning of retail shop), s 7(3) (exclusions from outgoings, including land tax), s 24 (permitted payments, including the land tax example), s 29 (matters considered by specialist retail valuers), s 37 (lessee's liability to pay outgoings), s 38 (lessee's proportion of apportionable outgoings), ss 38A to 38C (annual estimate, audited statement, withholding), s 40 (sinking fund for major maintenance and repairs). Land Tax Act 2010 (Qld), s 83A. Queensland Small Business Commissioner, Outgoings and Restricted Charges in Retail Leases fact sheets. Worked examples are illustrative and use assumed figures.