If you are planning to lease a business space for the first time, then you should know that these leases are markedly different from residential rentals. There are also many types of commercial property leases; here is an overview of some of the most common ones:
The Gross Lease is also called the Full-Service Lease. In this case, your rent is all-inclusive, which means you pay the rent and the landlord is responsible for paying all the recurring expenses associated with the property. Things like insurance premiums, maintenance issues, janitorial services and property taxes, among others, are all in the hands of the landlord.
Many business owners like the Gross Lease because it ensures they don't incur any hidden costs of running their business; all they have to do is to pay rent. A potential problem is that an unscrupulous landlord may screw you up if they don't take care of their responsibilities, for example, if they don't settle bills on time.
The Net Lease is an opposite of the Gross Lease; in this case, you pay the monthly rent and the landlord also charges you the recurring expenses separately. This means in addition to the rent, the landlord may also charge other expenses such as common area maintenance fees, property insurance, and property taxes. It may seem attractive in that the base rent is lower than that for Gross Lease rent, but the issue of additional payments negates the low-rent advantage. This is because the rent may fluctuate with the fluctuation of the recurring expenses.
Modified Gross Lease
A Modified Gross Lease is a marriage between the Net and Gross Lease. In this case, the landlord charges you rent that include a portion of the recurring expenses associated with the property. Your landlord then takes care of the rest of the expenses without further input from you. The main advantage is that your rental payments remain the same even though they are slightly higher than what you would pay in a Net Lease.
A Percentage Lease is a completely different type of lease when compared to the above types of leases. As the name suggests, for a percentage Lease, you pay a base rent plus a percentage of your monthly sales. For example, you may be required to part with 5% of your monthly sales in addition to the specified base rent. This means the landlord benefits greatly when your sales increase, but their base rent remains the same even if you incur a loss. It isn't exactly tenant-friendly, but the base rent tends to be lower compared to other types of leases, and some landlords insist on it.
For more information on your leasing options, contact local real estate agents.Share