You’ve found your dream space for your business, and you’re ready to sign on the dotted line. But before you do that, take a second to make sure you know what you’re getting into.
There’s several types of leases, all with varying degrees of risk for the tenant. Here’s the basics of each option to help ensure you don’t get stuck with unexpected costs.
Let’s start at the riskier end of the spectrum.
Absolute Net Lease
This type of lease has the most risk for a tenant because the tenant is responsible for all expenses and repairs related to the building. So, you’ll pay all maintenance, repairs, utilities, real estate taxes, and insurance costs in addition to base rent.
Triple Net Lease
In this lease, you’ll pay most maintenance, repairs, utilities, real estate taxes, and insurance in addition to base rent. However, the landlord usually pays for structural repairs and capital improvements to the property, making it a slightly less riskier lease to enter into.
Modified Gross Lease
Here, you’ll pay some — but not all — of one or more operating expense items (maintenance, repairs, utilities, real estate taxes, and insurance). For example, under this lease, the building’s heating expense might be included in the base rent rather than being charged separately on a prorated basis. The specific expenses paid separately can vary extensively, so it’s important to know exactly what’s included in the base rent with this type of lease. This type of agreement is sometimes called a modified net or base plus lease.
Gross/Full-Service Lease
In a gross or full-service lease the rent is all-inclusive. Maintenance, repairs, janitorial services, utilities, real estate taxes, and insurance are included in the base rent. This type of lease is easy for the tenant, allowing you to forecast expenses without worrying about unexpected charges. You can concentrate on growing your business while the landlord assumes all responsibility for the building.
In Conclusion
Knowing what type of lease you’d be signing is only one piece of the leasing puzzle. Read more in our Tenant’s Guide to Commercial Leasing or contact us to speak with an agent. Sign up below to download the Tenant’s Guide to Commercial Leasing!
