Navigating your way through commercial leases can be complicated.
Whether you are just starting your business or are looking for a new space, there will come a time when you need to sign a commercial lease. There are three basic categories of commercial leases: net, gross, and modified gross. In each of these categories, there is a different type of lease. Let’s take a look at net leases and they work.
Net Lease
A net lease is when a landlord charges a lower base rent for the commercial space but adds in some expenses associated with operating, maintaining, and using the property. These costs could include real estate taxes, property insurance, and common areas maintenance expenses like janitorial services, water, trash collection, landscaping, parking lot maintenance, fire sprinkler systems, and property management fees. There are several types of net leases to choose from:
- Single net lease, or an N lease, is where a tenant pays a base rent plus a pro-rated share of the building’s property tax. A pro-rated share means you pay a portion of the total bill based on the leased portion of the building. The landlord covers all other building expenses but the tenant pays for utilities and janitorial services.
- Double net lease, or an NN lease, is like a single net lease where a tenant pays the base rent with a pro-rated portion of the property taxes. But the tenant also pays insurance while the landlord covers expenses for structural repairs and any common area maintenance that may need to be done. The tenant is responsible for their own utilities and janitorial services.
- Triple net lease, or an NNN lease, is the most popular kind of lease for a freestanding commercial building. This is where the tenant pays all or part of the three “nets” including the property taxes, insurance, and common area maintenance items on top of a base monthly rent. These leases are more landlord friendly. These payments can fluctuate from month to month or year to year depending on operating costs but there is an element of transparency here that is a perk. Tenants can see where the operating expenses are and how they can change them to save money on their lease.
There are many different types of commercial leases for you to choose from and net leases are only some of them.
Leasing a Commercial Space with Clagett Enterprises!
At Clagett Enterprises, we have extensive experience serving the greater Frederick area and Western Maryland, since 1987. Our team is a full-service real estate company that’s ready to help you with your real estate and residential sales needs. Speak with a Clagett professional at 301-665-6009, or request a proposal for preventive maintenance here.