The Different Types of Commercial Real Estate Leases

When you are leasing commercial property for your business, there are many factors that need to be considered. There are many different types of leases and clauses which can seem confusing at first. However, with a little bit of research and an understanding of your company’s needs, it’s not that difficult to understand the different types of leases and how they can benefit your business. There are several main types of commercial leases which we will explore in this blog post. Each lease has its own pros and cons, so it is important to understand them all before making any final decisions on leasing a property.

What is a Commercial Lease?

A commercial lease is a contract that lets you rent commercial property for a set period of time. The lease will define the amount of money that you will be required to pay in rent, along with all of the other terms and conditions of the lease. When you are leasing commercial property, the length of the lease will be one of the biggest factors that you need to consider. The initial term of the lease is the length of time that you will be leasing the property for. A renewal term is the amount of time that you will have the option to continue leasing the same property. When leasing commercial property, the initial term of the lease and the renewal term should not be more than 10 years. Anything over 10 years can get tricky, depending on the type of lease that you sign.

Net Lease

A net lease is one of the most common types of commercial leases that you will come across. In a net lease, the tenant is responsible for paying their share of operating expenses and property taxes. This type of lease is typically used for properties that are considered to be “core” or “core plus”. A core property is a commercial building that is located in a good area with tenants that have good credit. A core plus property is a building that is in great condition, with low operating costs. If you are leasing a building that is considered to be “non-core”, a net lease is highly unlikely. A non-core building is one that is in bad condition, has high operating costs, and has tenants who have poor credit. In a net lease, the landlord is responsible for paying for maintenance and repairs.

Gross Lease

A gross lease is similar to a net lease, except the tenant is responsible for all operating costs, property taxes, and maintenance of the property. A gross lease will typically be used for non-core properties, as the landlord does not want to be responsible for any of the costs. Gross leases are typically used for properties that are in bad condition and have high operating costs. The amount of rent that you will be required to pay will be less than if you were leasing a net lease. However, the amount of money that you will need to put down as a security deposit will be higher.

Serviced Lease

A serviced lease is usually used for new buildings and often has a shorter initial term than other types of commercial leases. A serviced lease is when the tenant is paying for building maintenance, as well as operating costs. This lease is similar to a gross lease, except that the tenant is responsible for paying for the maintenance of the building. Serviced leases are usually used for new buildings so the tenant can have an input on what they would like to see in the building.

Summing Up

When leasing commercial property, it is important to understand the different types of commercial leases. A net lease is when the landlord is responsible for paying for property taxes and operating costs, while a gross lease is when the tenant is responsible for those costs. A serviced lease is when the tenant is responsible for paying for maintenance. The length of the lease is one of the most important factors that you need to consider when leasing commercial property.