When many people think of leases, they automatically turn to residential leases, but that’s not the only type of lease that some people deal with. People who are starting a business may have to lease a property, which means they need to become familiar with commercial leases.
Commercial leases are structured very differently than residential leases. A net lease is one that requires the tenant to absorb some costs of the property, which is different than a gross lease that requires the landlord to pay those costs. Typically, the base rent in a net lease is less than the base rent in a gross lease.
N, NN, NNN leases
Net leases vary greatly, depending on what type of net is present.
- A single net (N) lease requires the tenant to pay maintenance, insurance or taxes.
- A double net (NN) lease requires the tenant to pay two of those expenses.
- A triple net (NNN) requires the tenant to pay all three of those expenses.
The exact terms of the lease and what each party is responsible for will be spelled out in the lease. It’s critical that both parties understand exactly what they’re responsible for, especially when the need for major expenses arises.
It’s important to remember that more comprehensive leases can protect both parties. Because of this, the document may be long and complex. Reviewing the terms of the lease prior to signing it is critical for landlords and tenants. This helps to ensure that they know how to handle situations with the property as they come up.
