Many business owners prefer to lease their first commercial real estate building for their business, rather than purchase their building or facilities. Leasing has many advantages, but it is important to understand the different types of leases available to you. Let’s examine the many lease options available for your business.

Gross Lease

A gross lease is the simplest form of leasing for tenants. The property owner charges a flat lease rate to you, the lessee. All fees associated with the taxes, upkeep, and insurance are the responsibility of the property owner. These are beneficial because you know the total leasing expenses you will pay throughout the lease. Because the business owner must estimate variable maintenance fees, like snow removal, monthly payments tend to be higher.

Net Lease

With a net lease contract, you pay the base rental fee. Maintenance, taxes, and insurance premiums are billed throughout the year, depending on the lease contract. These fees are all based on the actual amount the commercial real estate property owner paid. Net leases give you a lower rental fee, and your responsibility to pay additional fees varies based on the type of contract.

• Single net leases include the rental fee, as well as the property taxes for the building. Property taxes are based on the percentage of the facility you lease. The property owner makes the actual tax payment to the taxing authority. They are also responsible for maintenance and insurance fees. Because repair and maintenance fees can vary, very few property owners offer single net leases.
• Double net leases include the rental fee, property tax charges, and insurance premiums. The landlord pays maintenance fees for the property. Double net leases are very popular, as the variable fees are predictable. Property owners feel comfortable building these fees into their contracts.
• Triple net leases include all three variable fees in the contract – maintenance fees, property taxes, and insurance premiums. These fees may be charged quarterly or annually, based on the contract terms, so it is important to understand when those additional payments are due. The benefit of a triple net lease is that the base rental rate is significantly lower than other options. However, maintenance fees can vary, depending on the age of the commercial real estate, weather events, and planned renovation of common areas.

Understanding the best lease option and how it benefits your company is an important part of building a successful business strategy.