Different Types of Commercial Leases

Commercial LeasesCommercial lease types vary, but generally speaking leases are written contracts between a property owner and a tenant. These documents include references to items such as the specified amount of rent and when payment is due. Usually, the rental period is stipulated, such as a three- year lease.  Leases differ, relative to their target area. For instance, an office building lease in a city like San Francisco and a retail lease for a strip center mall in a smaller city like Sarasota, Florida, would be quite different.Commercial Lease Types:•Gross•Net•Percentage•Ground•Sublease•Assignment•Turnkey• Build-to-suit• Sale/Lease-backGross vs. Net LeasesA gross lease is one in which the owner/landlord is responsible for paying taxes, insurance and any other costs of property ownership. Most apartment leases are gross leases since you just pay rent and that’s all. Some apartments may require you to pay your electric bill, but everything else is paid by the landlord in a gross lease.A net lease is just the opposite - basically, you pay a rental fee to the landlord and then you pay your taxes, insurance, maintenance, and all other fees and expenses associated with the property. Therefore, when you as a landlord agree upon a net lease, the rent you receive is net income. You don’t have to pay any other costs out of it.Triple Net LeaseIn the commercial arena most leases are net, to a certain degree. You could even have a double or a triple net lease.  A triple net lease used to mean that you would pay the rent, taxes, insurance, and common area maintenance (CAM). Nowadays, there’s no such thing as a completely net or gross lease.Typically, if you were renting space in a freestanding facility, you would pay all fees and operating expenses associated with that area.  The great thing about a commercial lease is that the vast majority of them are net leases. A lease may be largely net, with the tenant paying rent and all of the other expenses of the property, like taxes and insurance.However, even in a case like this, the landlord would pay something, like the insurance on the building structure itself. Therefore, the lease isn’t completely net.  Tenants insure the contents of a structure. Before the lease begins, if you have a lot of equipment, you should inspect it to make sure it’s in working order. Then, meet with your tenants and agree on procedure, should anything happen to the equipment or property.Tip: Never allow someone else to insure your assets. The policy could lapse and you might not find out that there was no coverage until after you filed a claim.There are different commercial lease types for different situations, make sure you pick the one that bests suits your needs.One Deal to Financial Freedom? Gary Tharp invites you to get access to ask the real estate experts who are mentors to millionaires today! Attend the next free commercial real estate webinar with some of the nation's leading real estate experts: commercial real estate buying group