Business owners often opt to rent properties instead of purchasing one. Sometimes, this is because they don’t want the responsibility of having a property and other times because they may have the capital available to make the investment in a property.
Commercial leases are much different from residential leases. One of the primary differences is that a commercial lease will typically assign costs to the renter that aren’t present in a residential lease.
A gross lease is one in which the landlord covers all of the expenses. A percentage lease establishes lease payments based on the total sales of the business. A net lease is one in which the tenant pays one or more expenses that a landlord would normally cover.
Types of net leases
There are three types of net leases. Each one is based on how many additional expenses the tenant is responsible for. The additional expenses include property taxes, building insurance and maintenance.
- Single net or “N” lease: Tenant pays one additional expense
- Double net or “NN” lease: Tenant pays two additional expenses
- Triple net or “NNN” lease: Tenant pays three additional expenses
Some of the items that the tenant pays for are pro-rata, so that each tenant in a building shares the expense. In most cases, the tenant is responsible for their own utilities, but this might also be split among tenants if the utility account is for the entire building.
Commercial leases can vary greatly from one property to another. Any business owner who’s considering leasing a space for their company should ensure they read the lease in its entirety. It may be beneficial for them to have the assistance of someone familiar with this area of law so they can ensure they aren’t missing any critical terms.
