Types of Commercial Real Estate Leases

DATE: 2006-10-19

A wide range of commercial leasing possibilities exist. Typically, an office lease in a major city and a retail lease in a suburban shopping center will be considerably different.

From a broad perspective, there are a few types of leases commonly found. Within these categories, leases may vary considerably.

Gross lease: The tenant pays a set amount of rent and the landlord is responsible for payment of taxes, insurance and other costs associated with owning the property.

Net lease: The tenant pays the rent plus a portion of the maintenance fees, insurance premiums and other operating expenses.

Triple-net lease: Typically, for a freestanding facility, this type of lease has the tenant paying for all fees and operating expenses associated with the space.

Shopping center leases: The tenant pays a base rate in conjunction with the square footage of the retail facility. Typically, the tenant will also pay some common charges and frequently a certain percentage of the gross sales. The tenant may also be assessed part of the property taxes. A shopping mall lease will often include terms about signage, hours of operations, common areas and deliveries. The landlord may also have the right to relocate the tenant.

Land or ground lease: The tenant leases the grounds and builds on the property. Typically, with a land or ground lease, all improvements on the property, including any building or buildings revert back to the landowner at the end of the lease period.

There are numerous variations on common lease forms. For example a lease may cover both office and warehouse space in one facility with separate rental amounts and separate options.

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