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Types of commercial real estate leases

On Behalf of | May 3, 2023 | Real Estate

If you are considering renting a commercial building in California, it is vital to consider the different types of leases that may be available. Each has its advantages and disadvantages based on your circumstances. Therefore, it is essential to read the lease carefully.

Gross lease

Sometimes called a net lease, with a gross lease, the tenant pays the base rent and utilities. The owner takes care of maintenance costs, insurance and real estate taxes. These leases, often in buildings with multiple tenants, allow the business owner to take care of his business without getting bogged down in other types of property management. Usually, the base rent is higher than other commercial real estate leases.

Net lease

With a net lease, the tenant pays the base rent and a proportionate share of the building’s upkeep and taxes. There are at least three levels of net leases, each with a different level of tenant responsibility. Building maintenance fees can be higher than expected. Be sure to read the lease carefully to see if you can break it because it is common for these leases to be bondable. In that case, you are responsible for the length of the lease.

Absolute lease

These leases are usually only available to larger creditworthy tenants. With an absolute lease, the tenant is responsible for everything, including structural repairs. These leases are usually signed for multiple years.

Percentage lease

Often, landlords owning malls use this type of lease. The tenant usually gets a lower base rent, but they must pay the landlord a percentage of their gross sales once they pass a particular level. That percentage varies, so tenants will want to consider the number carefully.

Different types of commercial leases are available. Consider the available options and read the lease carefully before agreeing to sign it.