Different Types of Commercial Leases
Commercial LeasesCommercial lease types vary, but generally speaking leases are written contracts between a property owner and a tenant. These documents include references to items such as the specified amount of rent and when payment is due. Usually, the rental period is stipulated, such as a three- year lease. Leases differ, relative to their target area. For instance, an office building lease in a city like San Francisco and a retail lease for a strip center mall in a smaller city like Sarasota, Florida, would be quite different.Commercial Lease Types:GrossNetPercentageGroundSubleaseAssignmentTurnkey Build-to-suit Sale/Lease-backGross vs. Net LeasesA gross lease is one in which the owner/landlord is responsible for paying taxes, insurance and any other costs of property ownership. Most apartment leases are gross leases since you just pay rent and thats all. Some apartments may require you to pay your electric bill, but everything else is paid by the landlord in a gross lease.A net lease is just the opposite – basically, you pay a rental fee to the landlord and then you pay your taxes, insurance, maintenance, and all other fees and expenses associated with the property. Therefore, when you as a landlord agree upon a net lease, the rent you receive is net income. You dont have to pay any other costs out of it.Triple Net LeaseIn the commercial arena most leases are net, to a certain degree. You could even have a double or a triple net lease. A triple net lease used to mean that you would pay the rent, taxes, insurance, and common area maintenance (CAM). Nowadays, theres no such thing as a completely net or gross lease.Typically, if you were renting space in a freestanding facility, you would pay all fees and operating expenses associated with that area. The great thing about a commercial lease is that the vast majority of them are net leases. A lease may be largely net, with the tenant paying rent and all of the other expenses of the property, like taxes and insurance.However, even in a case like this, the landlord would pay something, like the insurance on the building structure itself. Therefore, the lease isnt completely net. Tenants insure the contents of a structure. Before the lease begins, if you have a lot of equipment, you should inspect it to make sure its in working order. Then, meet with your tenants and agree on procedure, should anything happen to the equipment or property.Tip: Never allow someone else to insure your assets. The policy could lapse and you might not find out that there was no coverage until after you filed a claim.There are different commercial lease types for different situations, make sure you pick the one that bests suits your needs.One Deal to Financial Freedom? Gary Tharp invites you to get access to ask the real estate experts who are mentors to millionaires today! Attend the next free commercial real estate webinar with some of the nation’s leading real estate experts: commercial real estate buying group
Source: Free Articles from ArticlesFactory.com
ABOUT THE AUTHOR
began his real estate career in Honolulu in 1966, selling land and
homes as head of one of Hawaii’s largest brokerages, and has now sold
and leased real estate in Idaho, Virginia, Puerto Rico and Florida.
For the last 30+ years Mr. Tharp has been one of the leading
commercial investment real estate brokers in Orlando, Florida and a
nationally known mentor. Gary is widely regarded in commercial real
estate, having developed tools and systems of commercial property
evaluation that have become industry standards used by professionals
nationwide. He is in demand by lawyers seeking expert witnesses in
real estate cases. With development experience ranging from office
buildings to industrial parks, Gary is Florida Partner for the Lynxs
Group, national developer of air cargo facilities, Fellow of the
faculty of the CCIM Institute, and Board of Advisors with HIS Real
Estate Network, commercial real estate buying group.
Leave a Comment
You must be logged in to post a comment.