Different Types of Commercial Leases

Signing a commercial lease is a big deal, as this locks you into a long-term commitment, on your commercial real estate, that will impact your company’s finances in a number of ways. However, there’s good news: commercial leases are not nearly as complicated as you believe.

There are three primary types of commercial leases:

• Gross lease
• Net lease
• Modified gross lease

The one similarity among these three types of commercial leases is that they all have a base rent with variations regarding who’s responsible for operational expenses.

Gross Lease

Also known as a full service lease, a portion of the tenant’s rent is used to cover all operating expenses. These include but are not necessarily limited to:

• Utilities
• Property taxes
• Property insurance
• Maintenance

As a tenant, the benefit of a gross lease is that you only have to make one payment each month. However, since you’re responsible for operating expenses, your base rent is typically high.

Net Lease

The flexibility of a net lease makes it a popular choice among tenants. While the base rent is lower than a gross lease, you’re still responsible for paying some operating expenses.

There is more than one type of net lease, with each one offering a unique arrangement:

• Single net lease: The tenant pays a fixed rent amount, along with some of the property tax. The landlord is responsible for all other building expenses.
• Double net lease: This is similar to a single net lease, with the main difference being that the tenant also pays some of the property insurance.
• Triple net lease: The tenant pays a fixed rent amount, along with some or all of the common area maintenance, insurance, and property taxes.
• Absolute triple net lease: This is like a triple net lease on steroids. The tenant is responsible for all costs, thus taking over full responsibility of the building without actually purchasing it.

Questions about Commercial Lease Agreements?

It doesn’t matter if you’re a tenant or landlord, it’s important to understand the many types of commercial leases.

If you have questions or require guidance on gross leases, net leases or modified gross leases, don’t hesitate to contact us. We can help you with all aspects of the lease process throughout Southwest Florida and Fort Lauderdale.

About TCG

At Trinity Commercial Group, Inc., our multi-disciplined team of professionals is widely respected for providing excellent leadership in a variety of commercial real estate services.