Commercial Lease: 12 Terms Explained (part 1)

lease agreement

If you’re currently looking for space to host your business, this article is for you.  When you lease commercial property, you need to agree to and sign a commercial lease agreement.  But commercial lease agreements are legal documents with an overwhelming amount of legal jargon and often hard to know what you’re agreeing to or signing for.  It is essential that you understand all the terms in the lease agreement.

A landlord agrees to lease their property with a series of conditions by which the tenant needs to abide.  A written contract will stipulate those terms and agreeing and signing will make the document legally binding.  You must always abide by the landlord’s terms in the lease agreement.  Before you sign the lease agreement, your solicitor may help you negotiate those terms with the landlord, so that both benefit from the leasing conditions. 

There are different types of commercial leases.  Understanding the functionality of each one of the leases you can opt for, will help you to choose the right one for you.

Here are 3 of 12 terms you will find in a commercial lease:

1 – Gross Lease

A gross lease is a type of commercial lease that allows the tenant to pay the landlord rent as a gross amount, which excludes expenses and property charges.  The rent should be exclusive of property taxes, maintenance expenses and insurance.  The tenant only pays for rent as a gross amount with no inclusions.

2 – Net Lease

Unlike a gross lease, a net lease is a type of lease that holds the tenant responsible for contributions towards payment of taxes, insurance fees and maintenance costs. As such, the tenant pays a flat rate for rent plus an extra amount to cover other costs.

3 – Percentage Lease

With a percentage lease the tenant pays for a base rent plus a percentage of the business profit.

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