Different Types of Commercial Lease Agreements (2024)

FAQs

What are the 3 main types of lease? ›

Gross Lease

Gross leases are most common for commercial properties such as offices and retail space. The tenant pays a single, flat amount that includes rent, taxes, utilities, and insurance. The landlord is responsible for paying taxes, utilities, and insurance from the rent fees.

“Option” shall mean: (a) the right to extend or reduce the term of or renew this Lease or to extend or reduce the term of or renew any lease that Lessee has on other property of Lessor; (b) the right of first refusal or first offer to lease either the Premises or other property of Lessor; (c) the right to purchase, the ...

Gross leases tend to benefit the tenant, whereas net leases are more landlord friendly. In a gross lease, the tenant has more control over how much is spent on such expenses as janitorial services and utilities.

Triple Net Lease:

The triple net lease encompasses property taxes, insurance, and common area maintenance, with the tenant paying for some or all of the cost of these three things on top of their base rent. It is one of the most common lease types.

Most authorities classify leases into four categories, based on the lease term: Estate for years; Estate from period to period (periodic tenancy); Estate at will; and Estate at sufferance.

What is a Break Option Clause? When looking at what a break option clause means - they allow one party to terminate the lease agreement before the end of the natural term.

Double net leases, called net-net leases or "NN" leases, are common in commercial real estate. The tenant pays property taxes and insurance premiums in addition to rent. The base rent is generally lower because of the additional expenses the tenant bears. All maintenance costs are the landlord's responsibility.

So, to recap, a NNN lease means that most of the costs related to upkeep and running the building will fall to you. A modified-gross lease splits the costs between you and the landlord.

Percentage leases are most often used with retail tenants. Multi-tenant retail properties, such as malls and shopping centers, use this type of lease because it benefits both parties involved.

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Automotive centers, gas stations, and even restaurants are often selected because they are closest to their customers. So if you have a flat tire, for example, you're going to the nearest mechanic rather than the cheapest or a local favorite.

Short-term commercial leases typically last for less than a year. Some might even be month-to-month arrangements.

A triple net lease, sometimes known as an NNN lease, is the most common type of commercial lease. A triple net lease is a lease whose monthly rent fee does not include operating expenses. Typical operating expenses include insurance, utilities, property taxes and maintenance costs.

A fixed-term lease is great for landlords and tenants because they both can predict and rely on the fixed rental cost every month. It's still possible to cancel a fixed-term lease, however, the tenant may end up paying a penalty for breaking the agreement.

Gross Lease: A gross lease, also known as a full-service lease, is one of the simplest types of commercial leases. With these leases, the tenant agrees to pay a fixed monthly rent and the landlord covers all operating expenses like property taxes, maintenance, utilities, and insurance.

operating lease criteria. While ASC 840 designated two types of leases, operating and capital, ASC 842 designates leases as operating and finance.