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Understanding Types of Commercial Leases

Burgoyne Law Offices Sept. 2, 2020

Property owners, managing landlords or agencies and tenants of commercial properties must enter into leases when working together. These legally binding contracts come in many different varieties, each with unique features and terms.

In general, a commercial lease contract may put the bulk of the financial responsibility on the tenant or the property owner. Some leases share the costs of maintaining a property.

The Triple Net Lease

Every property requires ongoing maintenance and repairs. Insurance and property taxes must also be paid on the property. The Small Business Chronicle explains that a triple net lease requires the tenant in a building to pay for these things. The costs for these items would be in addition to the cost the tenant pays the landlord or owner for actual rent.

The Gross Lease

In contrast to a triple net lease, a gross lease leaves financial responsibility for insurance, taxes and maintenance with the property owner or landlord. The tenant may pay a higher rent rate in exchange for this shift in responsibility and the ability to have a set monthly expense.

The Modified Gross Lease

According to The Motley Fool, the modified gross lease represents something of a blend of the triple net lease and the gross lease. Every modified gross lease may come with its own unique terms based on the needs and preferences of the parties involved. In short, the landlord and the tenant find ways to share the general operating costs associated with a property rather than requiring one party to pay for everything. This lease provides a level of flexibility many landlords and tenants may appreciate.