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What is the most common type of commercial lease?

On Behalf of | Feb 28, 2023 | Real Estate |

Entering a commercial lease in New York is a complex process. There are many types of commercial leases, and before signing one, you probably want to know if it is the best one for your situation.

Gross leases

A commercial lease can be a gross lease or a net lease. In a gross lease, the tenant pays one monthly fee that covers rent, utilities, security, taxes and any other fees involved.

The tenant pays the rent to the landlord and the landlord pays the fees for the tenant.

Net leases

A net lease involves a tenant paying one fee for the rent, but being responsible for paying the fees and costs that would normally be covered by the monthly rent in a gross lease.

There are three different types of net leases: single, double and triple net lease. A triple net lease, sometimes known as an NNN lease, is the most common type of commercial lease.

A triple net lease is a lease whose monthly rent fee does not include operating expenses. Typical operating expenses include insurance, utilities, property taxes and maintenance costs.

As a tenant, you are billed monthly for these expenses, in addition to your rent.

Pros and cons of each type of lease

One advantage of a gross lease for a tenant is that it offers simplicity, which is important in a real estate transaction. There is only one rental fee paid each month and once that is paid, all other expenses are covered.

However, a gross lease means that a tenant must trust that the landlord will pay all operating expenses fully and on time. The monthly rent is also usually higher, since it is covering all other operating expenses.

Although a tenant may be attracted to the lower monthly rent offered by a net lease, taking care of all other operating expenses means that money is probably not saved overall.

Additionally, a net lease means the tenant has the responsibility of paying the operating expenses.

Helping you with your real estate needs

Choosing the best type of commercial lease for your situation can be complicated, whether you are the landlord or tenant. Attorneys help clients understand their options and resolve their issues.