In the commercial real estate world, many businesses tend to lease out space from a property owner, rather than purchasing the property. This is due to the fact that the ideal property for sale, in a prime location like downtown or near large shopping centers and strip malls, are hard to come by. Property Owners would rather rent these spaces out long term instead of selling outright. The most commonly used terms for commercial leases are “Net Leases.” These terms can easily become confusing to most people, including myself, which is why I decided to open up this month’s blog with simple definitions explaining the differences to the best of my knowledge. Keep in mind I am not an attorney.
A Single Net lease is when the lessee (tenant) pays a base rent plus the property taxes. The landlord or property owner pays the operating expenses, or CAM (Common Area Maintenance), and the Insurance.
A Double Net Lease is when the lessee pays a base rent plus property taxes and Insurance, and the landlord or property owner pays the CAM fees which usually includes the roof, structure and foundation.
A Triple Net lease is when the lessee pays a base rent plus property taxes, property insurance and Maintenance fees and is responsible for the roof, structure and foundation. This type of lease is in favor of the landlord.
Since the tenant is solely responsible for these additional expenses in a Net Lease, the base rent tends to be generally lower than rent charged in a standard lease agreement. Another lease option is a Gross lease where the lessee pays a base rent plus their own utilities, interior maintenance and insurance, and the property owner is the one responsible for the Triple Net expenses. It is highly advisable to have an attorney review the lease and the fine print prior to signing an agreement. I hope this blog post helped give a clear and quick definition of these commonly used terms. Thank you for taking the time out of your day to read my post. Merry Christmas!
About Shannon Gilbert – Shannon is a commercial real estate associate for SVN | SouthLand Commercial. She is based in Pensacola, Fla and started working in the real estate industry in 2015. Prior to joining SouthLand Commercial she worked on the residential side of real estate. She is now exploring the various aspects of commercial real estate, and identifying the area of the business in which she would like to specialize. To contact her, you can call her at 850-610-8339, or email her at [email protected] You can also find her on Twitter at @.
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