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What are the types of commercial leases?

On Behalf of | Sep 4, 2023 | Real Estate |

Setting up a commercial lease can be complex, especially when determining the appropriate lease type. These details are usually in the lease agreement but could require discussion if the setup seems unfavorable to the tenant or the landlord. Fortunately, both parties can determine these conditions even before drafting the lease.

Commercial leases can fall under the following categories:

  • Gross leases: The tenant will only pay for rent in this arrangement. It means the landlord will cover other expenses, such as maintenance costs and taxes on the property. This lease is typical with residential properties.
  • Net lease: This setup allows the tenant to pay for other fees in addition to their rental payments. These fees could include property insurance, taxes and other costs necessary to maintain the property. All additional expenses must be in the lease agreement if they choose this option.
  • Triple net lease: With this lease type, the tenant fully shoulders the rent and other accompanying costs concerning the property. These expenses could include repairs, maintenance activities, insurance and taxes. An agreement for this lease should contain all costs, including the rent and operating fees.

Tenants and landlords should clearly understand the type of lease before signing an agreement. They could also include other clauses or terms to accommodate the tenant’s business operations. 

Who can draft the commercial lease agreement?

Most of the time, landlords create the agreement and present it to their tenants for review. If not, the tenant can draft the document, show it to their landlord and negotiate provisions as needed. Regardless of who drafted the contract, both sides should understand their obligations and privileges concerning the property.

Ideally, both parties should have reliable legal counsel to properly adjust the contract and conduct the transaction. Doing so can also help them check for potential risks and address them before sealing the deal.

Founding Partners Damaso W. Saavedra and Allyson D. Goodwin