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The types of commercial real estate leases

On Behalf of | Nov 14, 2022 | Commercial Real Estate

Residential leases in California and around the country are fairly straightforward, but things are far more complicated in the commercial real estate sector. Some commercial leases are very similar to residential leases and require landlords to take care of property taxes, insurance and maintenance, but many commercial leases make these costs the responsibility of tenants. No two commercial real estate leases are the same, but they all fall into a handful of broad categories.

Commercial real estate leases

Leases that leave maintenance, taxes and insurance up to landlords are called full-service or gross leases in commercial real estate transactions, and they are quite rare. Net leases that require tenants to cover these expenses based on the amount of square footage they occupy are far more common. Triple net leases require tenants to pay all these costs. They are often signed when a single tenant occupies an entire building.

Percentage and NNN leases

Most commercial real estate leases are either gross or net, but there are a few exceptions. Percentage leases are that require tenants to hand over some of their revenue as well as rent are sometimes signed by startup companies with innovative ideas but little cash, and NNN leases are that absolve landlords of just about all responsibility are attractive options to companies that want to occupy a building as if they own it.

Commercial tenants should do their homework

There are many types of commercial lease to choose from, which means companies that companies looking to rent space would be wise to do their homework and weigh up their options. Commercial real estate leases can last for years and be very difficult to get out of, so a hasty decision could be a mistake that casts a long shadow.