When you are leasing a commercial property for the first time, understanding lease agreements can be daunting. There are many different ways to structure a lease, but there are essentially three categories that all leases fit under. If you understand these three primary types of leases, you can begin to understand the lease arrangements available. Here are the three types of leases to consider when leasing a commercial property.
Sometimes referred to as a full service lease, a gross lease covers all the property’s operating expenses. This includes property insurance, property taxes, and property maintenance. Some agreements can even include utilities, waste management, and landscaping. Since these leases are the most comprehensive, they are also often the most expensive. However, they make managing the property simple, so they’re ideal for busy business owners and entrepreneurs who are short on time.
Net leases offer some of the same coverages as a gross lease but are structured so the lease covers some of the costs. Net leases come in three primary categories:
- Single Net Leases: With a single net lease, the tenant pays for property taxes and rent.
- Double Net: Also called net-net leases, the tenant pays for property taxes, property insurance, and rent.
- Triple Net: With a triple net lease, the tenant pays for property taxes, property insurance, property maintenance, and rent.
- Absolute Triple Net: The tenant takes on all costs associated with the building.
Net leases are more affordable than gross leases but often come with added expenses. Before signing a net lease it’s a good idea to consult with a commercial real estate to estimate the added costs to get a full picture of your monthly expenses.
Modified leases are designed off either gross or net leases, but really just opens the negotiations between the landlord and the tenant. With a modified lease, the tenant pays the base rent figure and then takes on agreed upon costs. These are typically used in buildings with multiple tenants. Modified lease agreements should always be reviewed with extra care before signing because the terms are not standard.
How A Commercial Real Estate Expert Can Help
When it comes to choosing a lease structure, you should always consult with a commercial real estate expert. They’ll help you determine if the lease structure is beneficial to both you and the landlord. The wrong lease structure can cost you a lot of money over time, so it’s important to work with someone who has the expertise to walk you through the process.
At Titan Lafayette Real Estate, our commercial real estate team is well-versed in all the leasing options available to our clients. We’ll not only help you find the perfect property for your business; we’ll review and help negotiate your lease agreement so it meets your budgetary needs. Give our agents a call to learn more!