The rent amount and type that the tenant (lessee) will be responsible to pay to the landlord (lessor) throughout the lease term is negotiated prior to both parties signing a lease agreement. The rent type will vary depending upon the services provided. For example, triple net rents are typically lower than full service rents due to additional expenses the tenant is required to pay in addition to the base rent. Contact the listing broker for a full understanding of any associated costs or additional expenses for each rent type.
- Full Service: A rental rate that includes normal building standard services as provided by the landlord within a base year rental.
- Double Net (NN): Tenant pays for only two of the building expenses; the landlord and tenant determine the specific expenses prior to signing the lease agreement.
- Triple Net (NNN): A lease in which the tenant is responsible for all expenses associated with thier proportional share of occupancy of the building.
- Modified Gross: Modified Gross is a general type of lease rate where typically the tenant will be responsible for their proportional share of one or more of the expenses. The landlord will pay the remaining expenses.
* Plus All Utilities: A type of Modified Gross Lease where the tenant is responsible for their proportional share of all utilities.
Commercial Real Estate Lease Types: A Glossary
This glossary defines common commercial real estate lease types, outlining the responsibilities of landlords and tenants regarding expenses like rent, utilities, and maintenance. Understanding these distinctions is crucial for both parties when negotiating a lease agreement.
1. Gross Lease: In a Gross Lease, the tenant pays a fixed rent amount, and the landlord covers all property expenses, including property taxes, insurance, and maintenance. This provides tenants with predictable costs. https://www.investopedia.com/terms/g/grosslease.asp
2. Net Lease: A Net Lease requires the tenant to pay a portion of the property expenses in addition to the base rent. There are several variations:
* single Net Lease (N): The tenant pays base rent plus property taxes.
* double Net Lease (NN): The tenant pays base rent plus property taxes and property insurance.
* Triple Net Lease (NNN): The tenant pays base rent plus property taxes, property insurance, and common area maintenance (CAM) charges. NNN leases are very common in single-tenant retail properties.https://www.thebalancesmb.com/net-lease-defined-2866438
3. Modified Gross Lease: This lease type falls between a Gross Lease and a Net Lease. The tenant pays base rent, and the landlord covers some expenses, while the tenant is responsible for others. The specifics are negotiated.
* Plus Utilities and Char: A Modified Gross lease where the tenant is responsible for their proportional share of the utilities and cleaning costs (frequently enough referred to as “chargebacks”) in addition to the rent.
* Industrial Gross: A Modified Gross lease where the tenant pays one or more of the expenses in addition to the rent. The specific expenses are determined and agreed upon by both the landlord and tenant before signing the lease.
4.Tenant Electric: The landlord covers all building services and maintenance costs,but the tenant is directly responsible for paying their electricity bill based on their usage within the leased space. https://www.crexi.com/commercial-real-estate-blog/tenant-electric-lease
5. Negotiable or Upon Request: This designation is used when the lease listing does not initially disclose the rent or the specific service type. This typically means the terms are open for discussion and will be determined through negotiation between the landlord and tenant.
6. TBD (To Be Determined): This indicates that the rent or service type is not yet known.This is commonly used for properties still under development or for which details are not finalized.
Disclaimer: This glossary provides general information and should not be considered legal advice. Consult with a qualified real estate attorney for guidance on specific lease agreements.