Commercial Real Estate Leases and Its Five Types

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Whether you are a landlord or a tenant, the main aspect you need to understand is options of commercial real estate leases. If you want to rent your property you must be aware of various lease options which are available in the market so that you can choose the best. Everyone likes to choose an option which suits him/her better, for that you must know all of them to check your suitability.

This post will help you understand the leases in a detailed way. When you are estimate and analyse the lease options available with you, it is important that you compare different lease options with all expenses in total rather that just focusing on base rental rates. Following are five main types of lease available in the commercial real estate market:

Percentage lease

Percentage lease is a type of lease in which tenant will pay a base rent plus the percentage of the monthly or annual gross sales of his/her business to you as a landlord for the rent of the space used by tenant. This type of lease is found in certain commercial spaces like shopping malls and other multi-tenant retail spaces. At first the minimum rent is paid i.e. the base rent and then hops in the percentage rent once the certain amount of gross sales are met. The point at which certain sales are met and the tenant is obligated to pay percentage rent is called as ‘breakpoint’. If this is not met then the tenant has to pay only the base rent. This type of lease is in favor of tenant.

Net Lease

Net Lease is a type of Commercial Real Estate Market in India lease in which the tenant will pay for their space, as well as for part or all of certain “Usual Costs” (expenses associated with operating, maintenance and use of the property) which is otherwise borne by landlord as a whole. These costs may include sewer, water trash collection charges as well as taxes, utilities etc. This type of lease is usually in favor of landlord.

 Double Net Lease

Double Net Lease is a type of net lease in which the tenant will pay all or part of taxes and insurance associated with use of the property. The landlord covers expenses for structural repairs and common area maintenance .Tenant will also cover the utility charges.

Triple –net lease

Triple –net lease is a type of net lease where tenant has to pay all the real estate taxes, building insurance, and maintenance (the three “Nets”) on the property in addition to any normal fees that are expected under the agreement (rent, utilities, etc.). A triple net-lease, is also known as an NNN or net-net-net lease.

Gross lease

Gross lease is a type of lease in which the rent is all inclusive. The landlord has to pay all the expenses related to the property, be it taxes, insurance, maintenance etc. from the rent received by the tenant. The tenant only has to bear with the wholesome rent and will be free of all other payment hassles.

 

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