Many businesses turn to commercial leases when they’re looking for a place to run their company. This gives them a chance to get the company up and running without having to make an investment in a property.
For some, reading a commercial lease is challenging because these leases aren’t anything like those for a residential property. Understanding some basics about these may be beneficial.
Commercial leases often include net terms
Commercial leases often have terms that pass part of the cost of the property to the tenant. These expenses can include insurance, property taxes and maintenance costs. The exact costs are known as “nets.”
- Single net lease: A single net lease makes the tenant responsible for paying property taxes.
- Double net lease: A double net lease has the tenant pay property taxes and insurance.
- Triple net lease: A triple net lease requires the tenant to pay property taxes, insurance and maintenance costs.
Net leases may seem overwhelming at first, but they can be beneficial for the tenant and the landlord. The landlord can shield themselves from some variable expenses related to the property. Since the tenant covers many of the costs, they have more freedom and ability to alter the property in the manner they see fit, as long as it meets the terms stated in the lease.
It’s critical that both parties carefully review the terms of the commercial lease. It’s beneficial to have someone else review it to ensure the terms are as expected. This can minimize the chance of something unexpected happening down the road.