Even if you work with a real estate broker who handles the details, it is important to fully understand your commercial lease agreement because, ultimately, you are the one signing on the dotted line. A good starting point is learning about different commercial lease types, so without further ado...
This is the most common type of commercial lease agreement. Here, the tenant is responsible for the base rent and utilities, insurance, maintenance, and other costs associated with using the property. Exactly what expenses the tenant is responsible varies, and then we get into different types of net leases.
Single Net Lease
This is a very simple lease agreement. The tenant is responsible for the rent and property tax of the property.
Double Net Lease
With a double net, the tenant pays the rent, property taxes, and the cost of building insurance. The landlord, in turn, pays for utilities, maintenance, and related costs. These leases are common on multi-tenant buildings/properties.
Triple Net Lease
This is a favorite among landlords: the tenant pays for most costs, including rent, property taxes, insurance, maintenance, repairs, and utilities. The benefit for tenants is that the base rent rate is typically lower than it would be for comparable properties.
Bondable Net Lease
Similar to a triple net lease, the tenant bears the responsibility for just about everything. For example, if a burst pipe causes flooding, the renter must pay for the repair and any damages. These leases are virtually ironclad. Tenants cannot break them before the lease period is over, even if they incur a significant repair expense.
Full Service Gross Lease
The tenant pays a fixed rent, and the landlord pays all associated costs.
Modified Gross Lease
Like a full service gross lease, tenants pay a fixed rent, and landlords are responsible for associated costs. However, tenants must pay for incremental increases in the owner’s operational cost. If property taxes increase, for example, the tenant pays a portion of that increase.
This is common in the restaurant and retail industries. The tenant pays a minimum base rate for rent, as well as a percentage of their business’s gross income.
If you have questions about your commercial lease agreement, do not hesitate to contact the Keller Williams Commercial Real Estate team.