People who are interested in leasing a commercial space may focus on things like the location and the features of the property. There’s another critical thing that they need to review – the lease.
Commercial leases are much different than residential leases. There are several different types of commercial leases that you may encounter when you’re looking at spaces. It’s important to know the differences between them because the type determines what if any, expenses you’re responsible for besides the lease payment.
Gross lease
A gross lease involves you paying one lump sum to the landlord. In turn, the landlord is responsible for all other expenses, including maintenance, insurance and property taxes.
Net leases
Net leases require you to pay a base lease payment plus other expenses. There are three types of net leases, N, NN and NNN. Each N indicates one expense – insurance, property tax or maintenance – that you’ll pay on top of the base rent.
Modified gross lease
A modified gross lease is a cross between a gross lease and a net lease. On top of the fixed lease, you’ll pay other costs, such as the utility bill, but this can be negotiated.
Percentage lease
A percentage lease requires you to pay a base lease payment plus a specified percentage of gross sales. This is a common lease structure for malls.
Before you sign a commercial lease, you should ensure you understand all the terms that are included in it. Working with someone who’s familiar with these matters is critical so you know exactly what you’re responsible for and what your landlord is required to do.