Making the decision to lease a property is smart for many entrepreneurs. It gives them a physical location for a business without having to bear the financial impact of a purchase. For those who haven’t ever dealt with a commercial lease, there is a slight learning curve.
Commercial leases aren’t structured in the same manner as a residential lease. They can be set up in a variety of ways, one of which is a net lease. Understanding what that means may be beneficial if you’re considering leasing a space for your company.
Net leases shift expense to the tenant
A net lease involves the landlord shifting specific expenses to the tenant. These vary based on the type of net lease that’s being used, but they all include the tenant paying rent. There are three additional expenses that may be part of a net lease. These include:
- Property taxes
- Maintenance
- Insurance
In a single net lease, the tenant pays one of those. In a double net lease, the tenant pays two of those. In a triple net lease, the tenant pays all three of those. Which of these expenses are covered by the tenant should be clearly listed in the lease terms.
Many commercial leases have other terms that are also present. These can include everything from modifications to the property to how the property will be used. It’s critical that tenants understand what’s allowed and forbidden. Having someone review the lease prior to signing it can be beneficial, so there aren’t any contract surprises down the road.
