What’s in a Commercial Lease?

A commercial lease is simply an agreement between a tenant and the property owner to allow the tenant to occupy a business period for a stipulated time where he will pay a stipulated amount of money. There are many different types of leases, each being unique depending on the nature of the business that is to be carried out. The leases will also depend on the laws that govern a country or a state. Roughly the following are some of the most common types of commercial leases available:

  • Gross lease
  • Net lease
  • Percentage lease
  • Sublease
  • Assignment lease
  • Sale/lease-back
  • Turnkey
  • Ground lease
  • Build-to-suit lease

Of all these leases, the most common type in nearly all countries is the net and the gross lease.

Gross Vs Net lease

A gross lease is the one in which the property owner is responsible for paying the land rates, insurance, taxes and any other cost of property ownership. This is the most common type of leases as most people only pay the rent to the property. The landlord then takes care of the rest of the costs. In many cases however, the tenants will be expected to cater for electricity and sometimes water bills. This does not make the lease to qualify as a net lease since most of the other costs will be the responsibility of the tenant.

The net lease on the other hand is the one in which the tenant is responsible for the costs pertaining to the building. Any rates or insurance that requires to be paid is the sole responsibility of the tenant. In many cases, when this is the case, a tenant tends to pay more in rent in the case of a gross lease as opposed to the case of a net lease. To learn more about these leases, click here.