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Understanding net commercial leases

On Behalf of | Aug 6, 2021 | Real Estate

People who are opening a business or looking for a new space for their company may be interested in leasing a building. Someone who’s never handled a commercial lease before may not realize that these are much different from residential leases. 

One thing that’s much different is that there are several different models of leases that are used for commercial properties. Knowing how these vary is imperative. While there are many types of leases, there are three that are more commonly used. 

The three types of net leases

There are three types of “net” leases. These include the single net, double net, and triple net. Each of these involves the tenant paying a base rent fee plus additional costs. Of those three types, the triple net places the most financial responsibility on the tenant. Here are the basics you should know:

  • Single net: Tenant pays rent plus at least one additional cost, such as utilities or insurance
  • Double net: Tenant pays building insurance and property taxes on top of rent
  • Triple net: Tenant pays for utilities, rent, property taxes, insurance and maintenance

It’s important to learn how expenses are determined if there’s more than one business sharing them. Some landlords determine this by the square footage of each company’s space. Others divide them equally. Knowing this ahead of time might help you to plan better for expenses that might come up during your business’ tenancy. 

Anyone who’s entering into a commercial lease should ensure they understand the terms. Breaching these leases usually comes with serious penalties. Ensuring you know exactly what you’re responsible for is imperative. It may be beneficial to have someone review the lease for you since they might spot points you missed.