An Informative Perspective on Commercial Leases
You’ve decided to make the big move. It could be as simple as outgrowing space or opening up a new business. Meanwhile, you should know. There are different types of commercial leases that all hold a particular value. By the same token, entering into the wrong commercial lease can cause you more than a few headaches.
Prior to signing on the dotted line, you should always seek professional assistance in negotiating a commercial lease. No doubt you will engage the services of a real estate broker to locate space. However, most times the type of lease you need is contingent on what you intend to lease. For example, do you need a warehouse or office space? Are you opening a retail store in a mall?
An attorney with experience in commercial leasing can help you negotiate the terms of your lease. Once the terms have been agreed to, it is also critical that they are committed to an acceptable written commercial lease agreement.
Different Types of Commercial Leases
First, let’s take a look at percentage leases. These types of lease agreements are most commonly used when retail stores rent space in either an indoor or strip mall. The tenant is charged base rent and is then required to turn over a percentage of gross revenue. The latter may be determined on either a monthly or annual basis.
For the tenant, the advantage of the percentage lease is that the base rent is traditionally low. Of course, the concept of relying on anticipated revenue is a bit of a gamble for the landlord. In many cases, a percentage lease agreement may only call for additional payment when gross sales exceed a certain level.
As an example, the terms could say that the tenant only has to pay extra when gross monthly revenue is more than $20K. The tenant might then be required to pay 5% extra on all income over the set revenue amount.
Many office complexes offer net leases to their prospective tenants. Net leases come in a few varieties. They are all premised on the concept that in addition to base rent, the tenant will be required to contribute to the overall expenses associated with the rented space.
In other words, tenants may need to pay a portion of taxes, insurance or maintenance fees. In a double net lease, the tenant pays base rent, taxes and insurance. When a tenant enters into a triple net lease, maintenance costs are added to the lease agreement.
A gross lease takes out the additional costs associated with the different net leases. In this type of agreement, the rent is set at a price that includes taxes, insurance, and maintenance. Notwithstanding, the tenant may be required to pay for utilities.
In most cases, the base rent is considerably higher for a gross lease than the others. However, some tenants prefer the predictability of the costs associated with renting the property.
If you are considering entering into a commercial lease agreement, the Law Offices of Manfred Sternberg and Associates would like to assist you. Contact us to schedule an appointment as soon as possible!