Different types of Commercial Real Estate Leases

The leasing process of commercial real estate is slightly different from residential real estate and the thing does not end over here. There is a wide range of commercial real estate leasing conditions and types occur. It is not like that a tenant and a landlord meet for commercial property transaction and sign the document, there is always a need of right commercial property lease document that can be beneficial for both.

Although the sole purpose of the landlord is to get a great income from their property to earn more profit and the tenant wants to minimize the rental costs as much as possible. But a commercial property lease in a major city and a shopping center lease in any suburb area will be entirely different. Therefore, law has categorized the leases into certain subcategories even within those categories leases differ from each other. Let’s review few out of them:

Gross Lease
Gross Lease is often described as general form of lease in which full services are included. Basically, Landlord fix a particular amount and takes as rent and makes him responsible for any charges like payment of taxes, insurance and other damage charges. This kind of lease is often applied in single or multi tenant office buildings where landlord prefers to collect the rental amount but the costs of all services keep on increasing with the time and same is the case with rental amount.

Triple-Net Lease
Another form of lease is triple-net lease in which landlord collects the rent but a tenant has to pay a significant percentage of all the expenses like maintenance, taxes and insurance. Tenant does not like this kind of lease deal but this is extensively used in commercial real estate and this deal is the best option for the landlord. There is one drawback of this lease is that fixed rent is lower in this system.

Land Lease
The landlord rent out the land to the tenant and he constructs building on it. This kind of lease agreements are for longer period but once the lease period is over, land plus the improvement done on it including building reverts back to the land owner.

Modified Net Lease
This type of lease exists somewhere between the gross lease and the triple net lease as it is quite helpful for both landlords and tenants. The charges are being split up between landlords and tenant like if the landlord agrees to pay the maintenance charges the tenant has to pay the taxes and the insurance charges. This kind of lease agreement is mostly used in industrial, retail or multi-tenant office properties.