Different Types of Commercial Leases

lease agreements

Understanding Different Types of Commercial Leases

There are different types of commercial leases.  Whilst residential leases are standardized, commercial leases are far more complex and fall under different categories or types: Percentage Lease, Gross Lease and Net Lease.

Percentage Lease

– the tenant pays rent base plus a percentage of the business revenue.

Gross Lease

– the landlord is responsible for payment of property tax, insurance and maintenance.

Net Lease

all maintenance expenses plus rent base are paid to the landlord, including taxes, utility bills and maintenance costs.

Net leases can be divided into three types:

  • Single Net Lease, which means that the landlord is responsible for payment of property taxes.
  • Double Net Lease, which means that the tenant is responsible for payment of property taxes and insurance premiums.
  • Triple Net Lease, which means that the tenant is responsible for property costs – taxes, building insurance and maintenance costs.

Before Choosing Which Type Of Commercial Lease

Never sign any type of commercial lease without reading it thoroughly and getting the advice of a legal expert, one who specializes in commercial leasing agreements.  A lease agreement will often be drafted to accommodate the landlord’s agenda.  Carefully consider each clause in the agreement and get your commercial property solicitor to help you understand both the meaning of terminology used and also the implications of each clause.  The clauses might benefit the landlord but the tenant might end up in a predicament which will no doubt affect business and cash flow.

So before you decide on a lease type, and most importantly, before signing a lease agreement, consult with a commercial leasing solicitor who will advise you on options that will suit your business.  Your solicitor could help you negotiate the best least for both the tenant and landlord, and also negotiate the clauses and what should be included in the lease agreement.  Please contact one of our commercial leasing solicitors for an initial informal discussion.  SG

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