The Different Types Of Commercial Leases

If you’re looking to rent commercial space, you might feel overwhelmed. Commercial leases come in several forms. Each type involves different payment terms, and it can be difficult to make the right decision. Learn everything you need to know about the types of commercial leases. When you need to choose your lease, you can be confident in your decision.

Commercial Leases

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1. Percentage Lease

A percentage lease is common for retail businesses and shops in malls. With this type of agreement, you pay a base rent price every month. But there’s more to your rent than the base. You also must pay a percentage of your sales for the month.

As your business succeeds, you pay more in rent each month. On the other hand, you pay lower rent on your less profitable months.

2. Net Lease

When you have a net lease, you pay a monthly rental fee. However, you also pay some other expenses for the property. For example, you might pay all of the taxes or maintenance fees.

Every net lease can have different terms. Therefore, it’s crucial to understands the term of your net lease before you sign it. Consider the potential costs and whether or not you can afford the total monthly payments.

This type of lease is similar to a double or triple net lease. However, it is less defined. You might only pay a percentage of the insurance or tax costs. Additionally, the landlord might be more open to the idea of negotiating the terms of this lease.

3. Double Net Lease

A double net lease requires the tenant to pay rent as well as taxes and insurance. The term double refers to the two additional expenses.

Although it might not sound like a good deal, a double net lease could be more affordable than other options. If the expenses are reasonable, the terms could be in favor of the tenant.

4. Triple Net Lease

This type of lease is similar to a double net lease. In this type of agreement, the tenants pays for rent, taxes, and insurance. However, they also must pay for maintenance.

Much like a double net lease, a triple net lease could be the best option for you. Typically, landlords pass off the cost of additional fees like taxes by raising their base rent in other types of leases. You need to do the math to determine which type is most affordable.

5. Fully Serviced Lease

Also known as a gross lease, this type of lease only requires the tenant to pay the monthly rent. The landlord must pay for all or most of the other expenses. As a result, the landlord could pass on the cost of those expenses by charging a higher rent.

When determining how much rent to charge, the landlord usually relies on the load factor. This term refers to a calculation that combines the square feet of usable space with the percentage of square feet of shared tenant areas. For example, you might share bathroom facilities with two other tenants. You split the cost of that with the other tenants.

This type of lease is most common in office, retail, and industrial spaces.

If you want to learn more about the different types of leases, you should contact Stoner Law Offices, LLC. A commercial real estate lawyer can explain your options and advise you on the best course of actions.




About the Author

Ankur Shah
Ankur Shah is the founder of the Value Investing India Report, a leading independent, value oriented journal of the Indian financial markets. Ankur has more than eight years of equity research experience covering emerging markets, with a focus on India and South East Asia. He has worked as both a buy-side investment analyst for a global long/short equity hedge fund and a sell-side analyst for an emerging markets investment bank. Ankur is a graduate of Harvard Business School. You can learn more about his latest views on global markets at the Value Investing India Report. -- He can be emailed at AnkurShah47@gmail.com