A guide to commercial lease types

Commercial leasing seems to have a language all of its own. If you don’t deal with them every day, you might have a few questions about the types of leases available and why. We have come up with some of the most used terms and their definitions for you here.

Gross Lease: A gross lease means just that, the amount to the landlord is gross and includes everything you might otherwise need to pay. Some of those items include taxes, building insurance (not covering your property or personal liability) and maintenance.  This type of lease can also include utilities and if it does not, is often referred to as a modified gross or modified net lease.

Full Service Lease: A full service lease is much like a gross lease and almost always includes utilities and often times janitorial services as well.

NNN or Triple Net Lease: This lease type passes on most operating costs, insurance taxes and maintenance costs to the tenant. In a triple net lease, tenants would share the cost of things like furnaces, air conditioners and roof repairs. Because of this, budgeting for a NNN lease can be more difficult to plan especially for older buildings. Often times, stops can be written into the lease that prevent costs from NNN expenses going over a certain percentage of a base amount per year. Or you may be able to have your real estate professional negotiate for a modified gross lease and remove the NNN altogether.

As with all real estate transactions, its best to find a qualified commercial real estate professional to represent your interests in the negotiations and to have an attorney review all documents before you sign anything.

Commercial Lease

Know what the terms mean in commercial leases

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