Major Types of Commercial Leases
When you’re ready to lease a new space for your business, you’ll likely have many questions and concerns, even if you are experienced with the process.
There are multiple lease structures, each one having a different impact on your business and cost liability, and they can be quite complicated in their terms.
Before reviewing or signing any commercial lease, it’s always advisable to meet with an experienced Fort Lauderdale commercial real estate attorney so you understand your obligations and negotiate favorable terms.
Below is a brief overview of the major types of commercial leases:
Net leases require the tenant to pay one or more of property taxes, insurance, and maintenance costs for the property along with their rent.
Many of them can heavily favor the landlord if they are not modified. The terms single, double and triple net refer to the following types of leases:
- Single Net – the tenant is required to pay all of the property taxes along with the rent. Maintenance and insurance is covered by the landlord, while utilities and other costs are covered by the tenant.
- Double Net – the tenant pays the property taxes and insurance, along with their rent. Maintenance costs remain the responsibility of the landlord.
- Triple Net – this passes on the cost of the property taxes, insurance and maintenance to the tenant, while they still have to pay for their rent and utilities, which is very favorable to the landlord.
- Absolute Triple Net – this is an extreme version of the triple net lease where the lessee takes on every imaginable risk and cost associated with the property.
Gross Leases/Full-Service Leases
In a gross or full-service lease, the agreed upon rent covers all operating expenses related to the property including common area maintenance, taxes, insurance, utilities, services, etc.
Tenants may prefer this type of lease for its simplicity, as they don’t have to be involved with the daily operations of the building’s maintenance.
These agreements can be quite favorable to a tenant, as many expenses may increase over time while the rent stays fixed.
Modified Gross/Net Leases
Modified gross/net leases allow for a compromise between the two types. Modified leases allow both the tenant and landlord to take on certain expenses, distributing the responsibility.