If you are a business owner negotiating a commercial lease is one of the most important steps in starting your business. It is a complex contract that in many instances will be offered by the Landlord without compromise. However, that rarely is the case, because if the terms are not right than the space is not right either. We have experience in negotiating key terms of leases to get you the leasing terms that fit your goals.
If you are a landlord don’t go on using a boilerplate or copy of a lease that your found online and the same goes for a tenant. Both landlords and tenants need a lease that fits to their commercial space leasing requirements.
Working with legal counsel to draft a lease that fits your commercial leasing requirements into the future is less expensive, than discovering later that you signed a terrible lease that will bankrupt you in the future.
Commercial space leasing brokers may know the space and the market they are in however, they should not be depended upon to break down the leasing terms offered. There are many issues or events that may take place in the future that the lease needs to anticipate. This is where competent legal counsel will help you determine what best for you.
Listed below are the most commonly used commercial leases that are available in the commercial space.
A Full-Service commercial lease is a common leasing arrangement for commercial office space in multi-tenant buildings. A Full-Service commercial offers:
- Base rental rate that is inclusive (landlord pays) of the real estate taxes, maintenance, insurance, cleaning, and utilities.
Like a full-service commercial lease, a gross lease also has a base rent which is inclusive of insurance and other costs associated with owning the property. The rent includes the landlord’s estimate of the real property expenses.
- The difference here is that the Tenant is responsible for the utilities.
With a Net lease the tenant is responsible for the rent, as well as, shares in the responsibility to pay other operating expenses i.e. maintenance fees and insurance premiums. The operating costs that the tenant will pay is usually less than the rent.
- The difference here is that the Tenant is responsible for a share of the some of the operating costs.
Triple Net Lease (NNN)
With Triple Net leases, the tenant is responsible the rent, as well as, for all fees, taxes, insurance and operating expenses associated with the leased space. Tenants will be paying for things such as management fees, property and related taxes (perhaps new taxes if the building is sold during the term of the lease), insurance, maintenance, security, capital improvements and more. Without having a lease that provides for a ceiling on these costs, a tenant could be put in tough financial position. Also, the lease should provide for audits of these expenses if they are considerably rising.
- The difference here is that the Tenant is responsible for all of the operating costs.
Shopping Center Lease (Percentage Rent)
In a Shopping Center Lease, a/k/a Percentage Rent Lease, the tenant will have a base rate for the retail store space and will be required to pay a certain percentage of the gross sales of the tenant’s business to the landlord. Here the tenant will also pay many CAM (common areas charges), management expenses, utilities, property taxes, marketing and maintenance costs associated with the space. A strip or shopping mall lease will often include terms about signage, hours of operations, common areas and deliveries. In some leases the landlord may reserve the right to relocate the tenant to another store in the same center.
- The difference here is that the Tenant pays rent, operating costs and certain percent of gross sales.
In a Ground Lease, the tenant leases the land on a long-term basis and constructs a building on the property at its own expense. All improvements made on the property, including new office space, retail space or other, revert back to the landowner at the end of the lease term.
- The difference here is that the Tenant is building out a vacant property.