What kinds of commercial leases are there?

On Behalf of | Dec 23, 2020 | Real Estate Transactions | 0 comments

Before you choose a building for your business, understand that commercial real estate is an entirely different world from residential real estate. In fact, many first-time business owners are not even aware that there are different varieties of commercial leases to choose from.

As with any other agreement, you will want to read your commercial lease carefully and make sure you understand all charges inherent in the lease, aside from base rent. Make sure that any lease you sign works well with your business’s goals and income output. According to FindLaw, some common varieties of commercial leases include flat and gross leases, as well as net and percentage leases.

Flat and gross leases

Some people also refer to a flat lease as a fixed lease. This is the simplest variety of commercial leases on the market. Essentially, with a flat lease, you will pay a single amount of rent for a specific period of time.

In comparison, a gross lease will involve paying a flat monthly amount, but it also generally involves an escalation clause. The escalation clause allows your landlord to increase the rent annually to deal with increasing expenses.

Net and percentage leases

If you have a net lease, you will pay a set amount of rent each month plus some of the additional expenses (utilities, etc). The landlord must calculate any increases off of real costs rather than estimates. A net lease may also require you to pay rent and all real estate taxes.

With a percentage lease, you must pay a base amount in addition to a percentage of generated gross income.