3 Types of Leases in Commercial Real Estate
When signing a lease to rent a commercial property, you will most likely end up signing one of three leases; a gross lease, a triple net lease, or a modified net lease. At Harkins Commercial Real Estate, we want to make sure you understand these types of leases prior to signing them.
A gross lease is a lease where the tenant pays a flat rental amount. In this type of lease, the landlord is responsible for paying all property charges that are regularly incurred by the ownership. This is how most apartment leases are set up.
This kind of lease is very similar to a full service lease where the monthly rent includes janitorial services, trash collection, utilities, water and sewer charges, property taxes, and other fees. In fact, the differences between a gross lease and a full service lease are so minimal that most people consider the two together.
Another type of lease is the triple net lease. In this type of lease, the tenant is required to pay a significant share of expenses of the operation of the space. This includes all taxes and insurance related to the rental unit. While landlords like this type of lease because it helps them fix their costs, tenants generally don’t like this type of lease especially in older properties.
The third type of lease is the modified net lease. This type of lease is a compromise between the gross lease and the triple net lease. In a modified net lease, the landlord and tenant set up a split of the maintenance expenses. Usually the tenant agrees to pay the taxes and insurance but the utilities are negotiated.
Before signing a lease on a commercial property, make sure you understand what kind of lease you are signing. Some leases are favorable to the tenant and some are favorable to the landlord. But there are also leases that are a compromise of the two. So if you’re looking into renting commercial real estate, remember these three types of leases to get the best deal for you.
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