From industrial space to retail store locations to office buildings, there are many types of commercial real estate. There are also many types of commercial real estate leases that a potential lessee should understand prior to signing any contract.
Some commercial leases offer businesses a way to accurately calculate and control their costs. Other leases provide more fluctuation in monthly costs but may offer lower rental prices.
Understanding a net lease
As explained by ValuePenguin, a net lease requires that the lessee pay rent to the landlord or property owner but remain responsible for other costs outside of that. A single net lease requires tenants to pay property taxes and a double net lease adds property insurance on top of that. A triple net lease may even require tenants to pay for maintenance of common areas, like parking lots.
With any form of a net lease, a tenant’s monthly expenses may fluctuate dramatically based on when needs arise.
Understanding a gross lease
In contrast to a net lease, a gross lease bundles in the cost of property taxes and insurance into the payments made to the landlord or property owner. Akin to the gross lease, a full service lease may also include maintenance and some utilities. These leases provide a fixed cost for lessees, but potentially with a higher overall cost.
This information is not intended to provide legal advice but is instead meant to give a high-level overview of some of the terms used in commercial leasing and what types of lease agreements a tenant may select from when renting commercial space.