LEase types
“The more you know what to look for, the more you can look for what to avoid”
Introduction
Commercial leases are an essential aspect of running a business, but with so many types of leases available, it can be challenging to know which one to choose. In this article, we’ll explore the different types of commercial leases and help you understand the differences between them.
Gross Lease
A gross lease, also known as a full-service lease, is a type of lease where the tenant pays a fixed monthly rent, and the landlord covers all expenses related to the property, including utilities, taxes, and maintenance costs. Gross leases are popular in office and retail spaces and provide tenants with a predictable monthly rent, allowing them to budget accordingly.
Net Lease
A net lease is a lease where the tenant pays a base rent plus some or all of the property’s operating expenses, such as taxes, insurance, and maintenance costs. There are three types of net leases: single net lease, double net lease, and triple net lease.
- In a single net lease, the tenant pays the base rent plus property taxes.
- In a double net lease, the tenant pays the base rent plus property taxes and insurance.
- In a triple net lease, the tenant pays the base rent plus property taxes, insurance, and maintenance costs.
Percentage Lease
A percentage lease is a lease where the tenant pays a base rent plus a percentage of their sales. This type of lease is common in retail spaces, where landlords want to benefit from the tenant’s success. In a percentage lease, the percentage of sales can be a fixed amount or vary depending on the tenant’s revenue.
Modified Gross Lease
A modified gross lease, also known as a modified net lease, is a type of lease that combines elements of both gross and net leases. In a modified gross lease, the tenant pays a fixed monthly rent that includes some of the operating expenses, such as taxes, insurance, and maintenance costs. However, the tenant may be responsible for some additional expenses, such as utilities and janitorial services.
Ground Lease
A ground lease is a lease where the tenant rents only the land, and they are responsible for building and maintaining any structures on the property. This type of lease is common for commercial developments such as shopping centers or office parks.
Choosing the right type of commercial lease depends on your business’s needs and budget. A gross lease provides a predictable monthly rent, while a net lease can provide cost savings for tenants who are willing to take on some operating expenses. A percentage lease allows tenants to pay based on their sales, while a modified gross lease provides a balance between gross and net leases. Finally, a ground lease may be an option if you need to build a structure on the property. Consider your options carefully and consult with a professional to help you make the best decision for your business.