Finding a property to start your operations is crucial to your business, but you have different options when you want to lease a property for commercial use. Commercial lease varies according to the type of property, and this greatly differs from a lease in a shopping center. Read on to know more about, modified net, triple net, and percentage leasing.
Commercial Lease Agreement
The world has become a very small place after the advent of technology. Moreover in this small place, it is not easy to have a space of your own. If one possesses some personal space then that person is very happy and rightly so. However, what if the person owns a couple of spaces? One cannot live in two personal spaces at the same time. It is beneficial for that person to commercially lease out one of those spaces.
You pay a specific amount of rent to the property owner if you choose a gross lease arrangement. This kind of lease favors your business, as your property owner pays all the usual costs associated with owning and maintaining the rented space. Your property owner may cover costs including utilities, water and electricity bills, repairs, insurance, and taxes. This lease is also popular in multi-tenant and single tenant office buildings and some in retail stalls. As costs increase over time, gross leases may contain escalation clauses that will increase the rent over time to balance taxes and maintenance costs.
Triple Net (NNN) Lease
A triple net lease is also popular in the commercial real estate industry. This kind of lease lets you pay for the usual costs, including taxes, maintenance and repair, and water and electricity bills. This kind of lease is best for property owners with tenants whose expenditures differ greatly, such as electricity consumption or an industrial user.
A triple net lease may be risky for your business, as you have no control over increases in expenses, and budgeting of your finances is more difficult. This is true especially when it comes to repairs and maintenance. You are responsible for every issue found in your space, and you need to pay the costs for replacement or upkeep.
Percentage leases are common if you own a retail store in shopping center. Your property owner usually demands a percentage of your business’ income to be part of the rent. You can pay this percentage, which can run as high as 10-12 percent in some contracts, annually, semi-annually, or quarterly.
Modified Net Lease
A modified net lease is helpful for your business and property owners, as you have the chance to negotiate and structure the lease that will work for both of you. You can usually set up a split of maintenance expenses, while you pay for other fees such as taxes and insurance. Modified net leases are effective for industrial, retail, or multi-tenant office properties. Tenants resistant to triple net leases, especially in older commercial properties, makes modified net leases a popular option because they can share the costs regarding building operation and maintenance.
Commercial leases can provide advantages and disadvantages for your business. You should review and negotiate the type of lease you prefer so both parties are certain about the lease’s terms. Always have a professional work with you so you can save money and find the suitable property for your business.
If you’d like to learn more about commercial real estate leasing, please contact us.