Types of Commercial Real Estate Leases

When entering into a commercial real estate lease, you should be aware of the various types of leases depending on your business needs and the type of commercial property you are looking for.  Commercial leases are used for office buildings, warehouse space or industrial space, shopping centers, other retail space, mixed use buildings, and other commercial uses.   

Common Commercial Leases 

Common commercial leases include the following: 

• Gross lease.   The tenant pays a fixed amount of rent, and the landlord pays the property taxes, insurance and other costs of maintaining the property.  
• Net lease.   The tenant pays rent plus a portion of the common area maintenance fees (CAM), insurance and other business operating expenses.  
• Triple-net lease.   This type of lease is used for free standing buildings.  The tenant pays for all fees and maintenance charges associated with the space.  
• Shopping center leases.  The tenant is responsible for paying a base rent based upon the amount of square footage, some CAM charges and a certain percentage of the tenant’s gross sales. It is not uncommon for the tenant to pay a portion of the property taxes as well.  Shopping center leases have more use restrictions such as signage, hours of operation, parking, deliveries and common area usage.  The landlord may also reserve the right to relocate a tenant. 
• Land or ground lease.  The tenant builds a building on the property and leases the land from the landlord for a certain amount of years. Typical ground leases are for 99 years.  After the lease term expires, the improvements on the property, including any buildings, revert back to the landowner.

Commercial Real Estate Broker 

A commercial real estate broker can help you find the right commercial space.  The broker is knowledgeable about commercial space that is available and can provide you with information regarding commercial rents in the area.  The broker brings the parties together, and receives a commission for his or her services once the lease is entered into by the parties.  Generally, the landlord pays the broker’s commission. 

Hire a Commercial Real Estate Attorney 

If you are planning on entering into a commercial real estate lease, you should have a commercial real estate attorney help you with the negotiations and review of the lease to make sure you are legally protected.  A commercial real estate attorney understands commercial real estate and landlord /tenant laws, and can explain them to you.  The attorney can also help you with renewals, subleases and assignments and represent you in court in landlord/tenant disputes.