Finding the Best Type of Lease for Your Business

You may be new to the business world, or to brick and mortar. It can be intimidating deciding which type of lease to consider and what the best move is for your company and future.  As experienced real estate brokers, the team at Granite Commercial Real Estate can help educate you with the many details and nuances that go with the most common types of commercial real estate leases.   When entering into a lease agreement with a landlord, it is important to understand the types you may come across.

Here are the main highlights of four types of leases to be considered:

Gross

With a gross lease, the tenant, pays a flat rental fee to the property owner for use of the property.  This type of lease typically includes all of the costs associated with the property, such as taxes, utilities, and insurance.  It may also include incidental charges.

Modified Gross

Another lease option is a modified gross lease. In this lease agreement, the tenant pays a base rent, in addition to an agreed upon share of some of the other costs, like property taxes, insurance, utilities or maintenance.  This lease is usually seen in an office building where there are other tenants.

NNN

In contrast to the gross leases, a triple net lease, also known as a triple-net or, simply, NNN is a lease agreement in which the tenant agrees to pay all operating expenses associated with the property in addition to the base rent. The tenant is responsible for the base rent and utilities as well as all the operating expenses of the property. These expenses can include real estate taxes, maintenance, and insurance. This is different to other leases were the landlord typically takes on these responsibilities.

Additionally, there are multiple types of net leases.  There is also a single net lease where a tenant could pay rent and property tax, and a double net lease where the tenant is responsible for rent, property tax and property insurance.  With an absolute net lease, the tenant is responsible for paying not only the base rent but also all expenses related to the property, including property taxes, insurance premiums, and maintenance costs.  With net leases, tenants are more likely to see lower rents since they are assuming other ongoing expenses.

Percentage

In order to decrease the base rate for tenants, there is a lease option to pay a base rent plus a percentage of earnings that are made when leasing the property. Typically, the percentage of revenue does not begin until a negotiated sales breakpoint is reached. This is attractive to tenants since the base rent is set lower.

Our team at Granite Commercial Real Estate can help you find a property and lease that will work for you. Contact us today to learn more about how we can help you find the right property for your business.

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The content provided in this article offers typical examples of the different types of commercial leases. However, this information is not a substitute for professional legal advice. Before entering into a legal contract, we strongly recommend that readers seek the advice of a qualified legal professional to ensure that their specific needs and circumstances are appropriately addressed.