A commercial real estate lease isn’t something you want to jump into without doing your research. Most require a commitment of resources and are filled with some language that might seem daunting. But these agreements between landlords and businesses are meant to be mutually beneficial, meaning each side is getting benefits from the contract. The tenant has rights and responsibilities, as does the property owner. Many businesses don’t realize, however, that there are several different types of commercial leases. Depending on the type of lease you sign, one party or another might need to pay for certain things, like maintenance or utilities. Before you negotiate or sign an agreement, here is a breakdown of the different types of commercial leases.
1. Full-Service Lease
Also called a Gross Lease, a full-service lease is commonly used in commercial buildings occupied by multiple tenants, like office buildings. With this type of lease, the tenant pays base rent and utilities. The landlord is responsible for all building expenses, including real estate taxes, insurance, and maintenance costs. Beyond the base rent after the first year, a tenant might have to pay a proportionate share of operating expenses.
2. Net Lease
A net lease is an adjustable type of commercial property lease. The base rent paid by the tenant is lower than that of a full-service lease, but the tenant also pays other expenses. There are three different types of net leases:
- Triple-Net Lease — The tenant pays rent, utilities, property taxes, insurance, and their pro-rata share of all building operating expenses.
- Double-Net Lease — The tenant pays rent, property taxes, and the cost of building insurance. The landlord remains responsible for maintenance and utilities.
- Single-Net Lease — The tenant pays base rent and the property tax associated with the space.
3. Modified Gross Lease
This type of lease lies somewhere between a triple-net lease and a gross lease. A base rent plus utilities and a percentage of the building’s operating costs are paid by the tenant. The landlord also pays a portion of the operating costs.
4. Absolute NNN Lease
With this type of lease, the landlord will not pay for any of the building’s expenses. The tenant is responsible for all building-related expenses, including any structure or roof repairs. It is similar to a triple-net lease but goes a step further with regard to what is required of tenants.
5. Percentage Lease
These types of leases are typically used with retail spaces. The tenant pays the landlord a base rent in addition to a specified percentage of generated revenue. The landlord is responsible for some or all of the maintenance costs, insurance, and property taxes.
Need Help Understanding the Types of Commercial Leases?
Every type of commercial lease comes with its advantages and disadvantages. An experienced commercial real estate and leasing agent can help negotiate a lease that meets your needs and is in your best financial interests.
At Caldwell Commercial Real Estate, we are proud to be your trusted partner for Commercial Real Estate in Charleston, SC. You can rely on the more than 80 years of combined experience of our commercial realtors and property managers to secure a favorable agreement. Contact us today to learn more about our services.
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