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Business owners should have a working knowledge of the different types of commercial lease agreements. Based on the lease type, you can successfully rent office spaces that meet your financial needs. While you need to rent offices in popular locations in order to drive sales, the commercial lease agreement should be straightforward and affordable. Unfortunately, the varying types of leases can make this process more complicated that it needs to be. Keep reading to learn about the different types of commercial lease agreements so that you can make a well-informed decision.
One of the most popular types of commercial lease agreements is the gross lease.
This type of commercial lease is often referred to as a "full service lease". Tenants favor this kind of lease because it is all-inclusive.
If you sign a gross lease, your landlord will pay the majority of your expenses associated with the property.
These expenses typically include taxes, insurance and maintenance.
Hence, this is a great lease option for business owners because they can stick to their budget easily without getting hit with any unexpected charges.
Modified gross leases are some of the most common types of commercial lease agreements.
They are, after all, favorable to many business owners looking for quality office spaces.
Modified gross leases allow for more negotiating than other types of commercial leases on this list.
An advantage of this type of lease is that your lease rate does not change based on taxes or other building costs.
Your price remains the same regardless of increases or decreases in cost.
Therefore, this is a great type of commercial lease to consider when shopping around for the perfect commercial office.
Small and large businesses alike sign single net leases and grow their businesses.
This type of commercial net lease requires some negotiation.
Tenants pay both a fixed rent cost and part of the property taxes every month.
You need to negotiate the portion of the property tax you will pay on a monthly basis before signing the lease.
Keep in mind that landlords hold tenants accountable for utility payments as well.
While these fees can add up, landlords take care of maintenance costs, which makes this type of commercial lease favorable to business owners.
Double net lease agreements demand that the tenants pay for additional expenses.
With this type of commercial lease, business owners pay for both property taxes and premiums for property insurance.
However, the landlord still pays for maintenance services as they do under single net leases.
If your budget allows you to pay for these additional fees along with your fixed rent, consider this type of commercial lease.
For more on how we assist with tenants being able to punch their landlord in the face, check out this video...
Although many business owners assume that triple net leases are the same as absolute net leases, they differ in one major way.
Unlike absolute lease agreements, triple net leases do not require tenants to pay for structural work after a disaster occurs.
You would simply be responsible for three fees in addition to your monthly rent.
These fees include insurance, taxes and maintenance.
Since the bills are typically still on the higher side with triple net leases, small business owners usually avoid them when they can.
In addition to the above types of commercial leases, consider the percentage rent lease.
If you sign a percentage lease, you will pay a base rent and a percentage of gross sales if your sales exceed the breakpoint.
Tenants work with landlords to create these breakpoints.
If you sign a percentage lease and your gross sales exceed the breakpoint you agreed upon, you pay a fixed percentage of the additional sales.
When sales decline so much that they do not reach the breakpoint, you simply pay your base rent.
However, when your sales skyrocket, you have to give up a portion of your profits. Consider both the advantages and disadvantages associated with this type of commercial lease.
In order for a business to reach their goals in a new location, business owners need to sign appropriate lease agreements.
Keep gross lease agreements in mind because they are all-inclusive.
Single net leases and double net leases are options as well.
Contrary to popular belief, absolute net leases and triple net leases differ.
Keep this in mind throughout your office search.
Modified gross leases are great options for natural-born negotiators.
A percentage lease requires tenants to pay for a fixed percentage of their gross sales if they exceed the agreed upon breakpoint.
Understand these different types of commercial leases to properly prepare for your business relocation.
If you have any questions about our process on how we help you understand your type of commercial lease and how we can help you win your lease negotiation, check out this short video (warning: it's super serious)...