Businesses looking to rent space in an Orange County shopping center have more work to do after they choose a location. Negotiating a commercial lease is one of the tasks requiring close attention. Understanding the jargon will certainly help in determining whether a potential tenant is receiving a good deal. One of the terms most future renters need to understand is “net,” which is used in three separate types of leases — the net lease, the double net lease and the triple net lease.
When used in a commercial lease, the term “net” applies to something extra a renter will be responsible for during the term of the lease. For instance, in a net lease, the tenant is responsible for a portion of the property taxes on the entire structure, which is usually based on the amount of square footage rented. In a double net lease, the tenant is responsible for a portion of the property taxes and a portion of the property insurance.
In a triple net lease, which is one of the most common forms of commercial leases, the tenant is responsible for portions of the property taxes, property insurance and common area maintenance costs. CAMs include maintenance needs of the entire structure such as utilities for the common areas, lawn maintenance and more. Property owners and tenants often end up negotiating the types and amounts of CAMs that a particular tenant will be responsible for during the term of the lease.
Orange County business owners looking to rent space in shopping centers may want to know that commercial lease agreements are negotiable. They do not need to simply accept the first draft of a lease presented by the property owner. One of the first things a potential tenant may want to determine when preparing for negotiations is whether it is a net lease and, if so, which kind. From there, all of the details require thorough review to determine what may need adjusting, taken out or modified in order to better balance the lease between the property owner and tenant.
