Whether you are looking for property to set up business or you have commercial property that you wish to rent out, it is helpful to understand how commercial leases work. Commercial leases are beneficial for many types of businesses, as they allow owners to save capital and put more into their business. Furthermore, the terms of commercial leases are negotiable and may vary from contract to contract.
In California, and in many other states in the nation, there are different types of commercial leases. It is important to understand what types of lease best meets your needs. Choosing the wrong types of agreement may cause serious repercussions for landlords and clients alike.
Understanding property expenses
Commercial leases differ depending on how they handle property expenses, including property insurance, real estate taxes, and common area maintenance charges. Common area maintenance charges are placed on top of the base rent and involve items, such as landscaping, parking lot maintenance, snow removal and other management expenses.
Types of commercial leases
While commercial leases vary depending on the specific terms negotiated between the landlord and tenant, most fall under these general types:
- Net lease: The tenant is responsible for taxes, insurance and maintenance costs.
- Double net lease: The tenant is responsible for taxes, insurance and rent.
- Triple net lease: The tenant is responsible for all property expenses, including any unexpected expenses.
- Gross lease: The landlord is responsible for all property expenses.
- Modified gross lease: Both the landlord and tenant split property expenses based on agreements.
It is important to keep in mind that commercial leases have fewer legal protections when compared to residential lease agreements.