Types of Commercial Leases
There are many types of commercial leases: gross lease, net lease, percentage lease, ground lease, index lease and graduated lease.
- A gross lease is very simple. The tenant pays a set amount of rent and no other expenses associated with the property. The landlord pays all taxes, insurance and any other expenses of the property.
- A net lease is a lease in which the tenant pays some or all expenses associated with the property. In a triple net lease, the tenant pays all taxes, rent and insurance.
- A percentage lease includes a set amount of rent plus a percentage of the gross sales of the business.
- A ground lease is a lease of unimproved land. Usually, one will lease this type of land to develop it. Ownership of the land and any improvements of it such as a building are separate. Donald Trump, for example, owns the rights of the land under the Empire State Building but not he actually building itself.
- The index lease is a pre-agreed upon amount of rent that can either increase/decrease according to an index. Usually the index used is the CPI (Consumer Price Index).
- Lastly, the graduated lease is a lease that shows a rent increase under a specific determined time under the lease terms. A new business, for example, might want this type of lease. They might want really low rent for the first six months then increase increments of rent for the next six months. This helps a new business lessen its start-up costs.
Selected Commercial Real Estate for Rent/Lease
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