Commercial Lease Types
Ahmad Turki, ARM?, ACoM?, PCM?
Accredited Residential Manager? | Accredited Commercial Manager? | M100 Certified | Professional Certified Marketer? | ADVETI Certified Real Estate Broker | Co-Founder Housez.ae
A lease is a written contract for the possession of part or all of a property for a stipulated period of time in consideration of the payment of rent or other compensation by the tenant.
The lease should clearly delineate the property owner’s and tenant’s responsibilities and eliminate misunderstandings between the owner and the tenant, so both parties must understand its provisions.
An important role of the property manager and team is to manage and enforce the lease. Therefore, it is imperative that property managers and their team understand the various lease types and their elements.
There are several types of commercial leases, each defining how costs are shared between the landlord and the tenant.
1. Gross Lease (Full-Service Lease):
What it means: The tenant pays a single rent amount, and the landlord covers most or all of the property expenses (e.g., taxes, maintenance, and insurance).
Ideal for: tenants who want predictable costs.
2. Net Lease:
What it means: Rent is lower, but the tenant pays additional costs like property taxes, insurance, or maintenance.
- Types:
Single Net Lease (N): Tenant pays property taxes.
Double Net Lease (NN): Tenant pays property taxes and insurance.
Triple Net Lease (NNN): Tenant pays property taxes, insurance, and maintenance.
Ideal for: tenants who want lower base rent and don’t mind variable costs.
领英推荐
3. Modified Gross Lease:
What it means: A mix between gross and net lease. Tenant and landlord share expenses, but terms vary by agreement (e.g., tenant pays utilities and maintenance).
Ideal for: Flexibility in cost-sharing.
4. Percentage Lease:
What it means: The tenant pays a base rent plus a percentage of their business sales. Common in retail spaces.
Ideal for: Businesses that expect high sales growth.
5. Ground Lease:
What it means: The tenant leases land and can build on it, but the land still belongs to the landlord. Usually long-term (50-99 years).
Ideal for: Businesses wanting to develop properties on prime land without buying it.
Each lease type offers different benefits and cost structures depending on the business needs and landlord-tenant agreements.
Source: IREM-ACOM