Types of Leases
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A commercial lease: a legal agreement between a landlord and a business for the rental of property.
There are multiple different types of leases when it comes to commercial real estate.
1.Single Net Lease
2.Double Net Lease
3.Triple Net Lease
4.Bondable Net Lease
5.Full Service Gross Lease
6.Modified Gross Lease
7.Percentage Lease
Single Net Lease
One of the simplest forms but most uncommon. This lease entails that the tenant is responsible for a base rent payment, plus additional expenses associated with the property which may include: utilities, insurance, property/building maintenance. This is normally used for renting single-family homes. A landlord would typically only use a single net lease, is to ensure that the property taxes are paid on time.
Double Net Lease
This lease makes the renter liable for base rent, property taxes, and the cost of building insurance while the landlord is liable for utilities, maintenance and any other related costs. This lease is normally used for multi-tenant buildings.
Triple Net Lease
The favorite lease among commercial landlords. This lease makes the tenant cover most of the costs including: rent, property taxes, insurance, utilities and maintenance. These properties are usually owned by investors who are more hands-off.
Bondable Net Lease
This is a variation of the Triple Net Lease. This lease agreement puts all risks related to the property on to the tenant. These types of leases cannot be terminated before the expiration date for any reason. This lease type is in favor towards the landlord.
Full Service Gross Lease
This lease allows the tenant to pay a fixed rent each month and the landlord is responsible for covering all other costs.
Modified Gross Lease
A modified gross lease is similar to a full service gross lease except of the fact that the tenant is responsible for the increase in the landlord’s operational costs calculated in the base year lease.
Percentage Lease
This commercial lease is mostly used by restaurants and retailers. This allows the tenant to pay a base rent in addition to a percentage of what the business’s gross income is. The rent payment is calculated by:
Base Rent + % of Gross Profits = Rent Payment
The percentage is agreed by both parties in advance.
Knowing what type of lease you will be receiving will help make a difference when choosing a property to rent.
Wanting to know more about lease types and terms? Connect with me at 501.993.1973 or cassie@cassiwells.com
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