Customized Legal Services For Businesses And Individuals
  1. Home
  2.  » 
  3. Commercial Real Estate
  4.  » What type of commercial lease will you sign?

What type of commercial lease will you sign?

| Jul 16, 2021 | Commercial Real Estate |

Starting or moving your business involves enough risks that you should not have to worry about the risks your commercial lease may contain. Too often, business owners sign leases they do not fully understand, which places them and their companies in a vulnerable position.

While you may understand that your lease includes information about your rent and specifics about the unit you are preparing to occupy, what you may not know is that commercial leases come in several varieties, each with its own benefits and drawbacks. Understanding the most common types of commercial leases may help you recognize when the terms are too much in your landlord’s favor and how you can take steps to balance the benefits and responsibilities.

What works best for you?

A landlord with integrity will understand the benefits of drafting a lease that does not create undue hardships for commercial tenants. This way, those tenants will be more successful and therefore more likely to stay for the duration of their contracts and even renew those leases. Commercial leases have more give and take than you may realize, but the four common types of leases for commercial properties offer different options to best fit the unique elements of certain businesses. For example:

  • With a gross lease, your rent may be significantly higher, but your landlord covers other operating expenses, such as common area maintenance and building repairs.
  • If you sign a triple net lease, or NNN, you will pay for your rent plus building taxes, insurance and maintenance, or some variation of these expenses.
  • A modified net lease is a compromise between the previous two leases and typically includes your rent and a portion of the costs to operate the building.
  • If your landlord offers a percentage lease, you will pay a base rent plus an agreed-upon percentage of your gross monthly sales.

Of course, these types of leases have variations, and in most cases, landlords are open to discussing and adjusting the terms, especially for a tenant who is willing to sign a long lease. Nevertheless, a commercial lease is often a complex document, and your signature on it binds you to its terms for the length of the lease. This is why it is vital that you read your lease carefully, ask questions as they arise and boldly negotiate for terms that are in your best interests.