When starting a new business, one of the most important things you have to get right is the location. Ideally, this means finding a contract for commercial office space. With that in mind, it is important to understand the different types of office lease contracts before you sign a commercial real estate lease contract for your new business base of operations.
You can lease office buildings in a variety of ways. The type of commercial leasing you sign will determine the amount of money you will spend and other obligations you will have during the lease term. Here are three common types of office leases:
1. Net Lease
Net leases are the most common type of office lease. In a net lease, the tenant pays for all expenses related to operating the building and its maintenance. These include taxes, insurance, utilities, and repairs. The landlord does not pay for these expenses and instead gets a fixed rent check from the tenant.
This means the tenant is responsible for all repairs, maintenance, and sometimes even utilities. Although this can benefit both parties, it can also be a disadvantage if the tenant cannot afford these costs.
Refer to the three different structures of net lease below:
Single Net: Base Rent + Property Taxes
Double Net: Base Rent + Property Taxes + Building Insurance
Triple Net: Base Rent + Property Taxes + Building Insurance + Common Area Maintenance
2. Full-Service or Gross Lease
A full-service or gross lease is the most common type of office lease. In a full-service lease, the landlord takes care of all repairs and maintenance on the building and provides utilities such as electricity and water. Gross leases do not include these services and are, therefore, more affordable for tenants who want to save money on their monthly expenses.
3. Modified Gross Lease
Modifying a gross lease is a way to adjust a rental agreement to fit the tenant's needs. If the landlord modifies, it is important to understand what that entails before signing anything. It could be an opportunity to save money or increase your expenses. It is always good to know what you are getting into.
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There are many different types of leases out there. Some are more advantageous to landlords, while other leases are more advantageous to tenants. By ensuring your lease is set up correctly, you can ensure that you have met your end of the bargain and avail the most of the commercial space in question.
If you are looking to get your office space lease taken care of, call our experts at Milbrook Properties for help.