Commercial Leases & What They Mean

Commercial leases are complex. There are many types of leases and the type of lease that is best for your property will depend on the sub-category of commercial property it is, how other similar properties offer their leases, if you have multiple tenants, and personal preferences. However, it can be hard to know which one to use because few know all the types of leases available. Here is a list of each type of lease:

• Gross Lease: In a gross lease, the tenant’s rent covers all operating expenses of the property. This may include property taxes, utilities, maintenance, landscaping services, and more. This will result in higher rents for tenants because they solely cover the costs of the property, but it is their only cost.

• Single-Net Lease: These types of leases charge rent to the tenant and a percentage of the property taxes. The landlord will pay for building expenses while the tenant pays for utilities and other services themselves.

• Double-Net Lease: Double-net leases are the same as single-net leases but with the addition of the tenant paying a percentage of the property insurance too. The landlord will take responsibility for maintenance of the common areas of the property, but the tenant is still responsible for paying their utilities and other services.

• Triple-Net Lease: These leases charge tenants a set rent plus a piece of the property taxes, property insurance, and common area maintenance costs. This provides a level of transparency to the tenants that allow them to review operating costs. They can then come up with ways to reduce operating costs and lower their lease payments.

• Modified Gross/Net Lease: Modified gross or net leases offer more flexibility in lease negotiations. The above leases cannot cover every possibility or need of both tenant and landlord. So, there are modified gross and net leases. The base rent and any additional expense splits are negotiated by tenants and landlords. One important thing to point out is that the rent rate remains fixed even if operating expenses increase or decrease.