Common Types of Commercial Real Estate Leases

Commercial leases

If you’re looking to expand your business, renting space in a commercial building should be a critical investment. Commercial real estate leases are long-term commitments, you should never take them for granted.

To fully understand the requirements of commercial real estate leases, such as who will have to pay property insurance, taxes, and utility bills, it’s important to know exactly what type of lease you’re signing. Learn about the common types of commercial leases in New York, New Jersey and Florida below.

Common Types of Commercial Leases in New York

Gross Lease

Also known as a full-service lease, a gross lease is the simplest type of commercial lease. It requires the tenant to make a lump sum payment to the property owner each month. The owner pays for property insurance, taxes, maintenance, as well as the common area expenses. However, the ultimate responsibility for these bills rests on the tenant.

No doubt the property owner will write the checks to the tax authorities, the insurance company, and the service providers, yet there are many other hidden charges that are not specified in the lease. These expenses, also known as the load factor, are to be paid by the tenant.

While a gross lease is most often a single, comprehensive monthly payment, it may be altered to exclude utilities and certain other expenses, which are then paid by the tenant separately. This is referred to as a modified gross lease.

Percentage Lease

Commercial property owners using this type of lease charge tenants a fixed base rent plus a percentage of their gross sales. This method is common in shopping centers, and is a great choice for tenants who can afford a base amount each month and pay more only if they make money from their business activities.

Net Lease

A net lease includes a base amount and certain property-related expenses. While the base amount is typically lower than the gross lease amount, the total payment for net lease often rises as additional charges are added.

In case of a single net lease, tenants pay the base rent, a share of the property tax, and bills for maintenance and utilities. All other expenses are paid by the property owner.

Double Net Lease

In a double net lease, the tenant is supposed to pay a base rent, their share of insurance premiums and property tax, and for their own utilities and janitorial services. The common area maintenance fees (CAMs), including