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3 types of commercial leases to watch out for

On Behalf of | Jan 31, 2021 | Contracts

As a new or expanding business owner, you want to get a lease that provides the lowest overhead for the best service. That seems like a no-brainer, but where residential leases have state and federal-mandated regulations — commercial leases do not. It comes down to the letter of the contract and without the right oversight, a signed contract might become a long-term headache that locks you in.

Since there is less regulation for commercial leases, there is an almost infinite variety to them. But three types stand out as commonly agreed on conventions.

Gross leases

According to Squarefoot, these leases involve you paying the base rent of a location while the landlord oversees all operation and maintenance costs. These tend to include high rent costs since the landlord assumes much of the responsibility involved and you should keep an eye on any charges that a landlord may include to offset said costs.

Modified gross leases

This lease is a middle-ground where, depending on the contract, you and your business take on some of the operational costs. These types of lease agreements have a lot of wiggle room, but may often align with the amount of space your business uses. If you take up 25% of a location, the agreement may stipulate that you pay 25% of the building insurance costs.

Triple net leases

The triple net lease stands as the opposite of a gross lease and involves you taking on most if not all of a building’s operational expenses. This often comes with lower base rent, but depending on the location could mean increased overhead due to repairs or other costs.

Landing your business’s physical location might feel exciting and you may find it easy to rush into something. But starting your business off on the right foot involves starting with the right leasing contract.