When commercial leases are made, a lot of attention has to be paid to how operating expenses and various responsibilities for the property are divided.
The kind of lease you end up with may reflect both your preferences (and the landlord’s) and your negotiating power. In general, the three most common forms of commercial leases are single net, double net and triple net.
Here’s how they work
Since the average commercial lease can run for a decade, it’s important to make sure that you fully understand your agreement:
- In a single net lease, the tenant pays a base rent and the property taxes, while the landlord covers all other operating expenses, like insurance and maintenance. This gives tenants the most control over their costs, but the least control over the property.
- In a double net lease, the tenant pays a base rent, property taxes and insurance. The landlord typically covers all the maintenance costs for the building, along with any operating expenses that aren’t specified in the lease. While not as tenant-friendly as a single net lease, a double net lease does a good job of balancing the interests of both parties.
- In a triple net lease, the tenant pays a base rent, property taxes, insurance and the cost of maintenance. This type of lease shifts the biggest part of the burden of operating expenses away from the landlord, making the tenant more responsible for the overall costs related to the property. In exchange, the tenant has greater control, which they may appreciate if they want less interference from the landlord or want to customize the property for their operational requirements or branding.
If you’re a business owner who is about to take on a commercial lease, it’s important to remember that almost everything is negotiable – you just have to know how to start. Our experienced attorneys can assist you in reviewing your commercial lease so that you understand all the terms and to negotiate the best lease terms for you and your business.