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Different commercial leases offer tenants different levels of freedom in their space. Read about the best lease types for different companies.



Types of Commercial Leases


1. Single Net Lease
A net lease is perhaps the most common form of commercial lease agreement.

With a net lease, the tenant is responsible for a base rent payment, plus additional expenses associated with the property.

That might include one or multiple additional expenses, including; Utilities, Insurance, Property/building maintenance

This is sort of like renting a single-family home: the owner pays the mortgage, but the tenant pays the owner rent and is then responsible for paying for their own utilities, arranging maintenance, and so on.

But net leases come in many forms, with varying layers of responsibility for the tenant.

A single net lease, sometimes referred to as an “N” lease, is the simplest form of net lease.

With a single net structure, the tenant pays the rent and the property tax associated with the space they are renting.

Single net leases are one of the lesser common lease structures in commercial real estate.

One of the only reasons a landlord would use a single net lease, instead of a gross lease, is to ensure property taxes are paid on time.

With a single net lease, the landlord collects funds used to pay property taxes and then they can pay the taxes to the city directly.


2. Double Net Lease
A double net lease, or “NN” lease, makes the renter responsible for the base rent, property taxes, and the cost of building insurance.

With this type of agreement, the landlord maintains responsibility for utilities, maintenance and other related costs. Double net leases are often used in multi-tenant buildings.

This way, the landlord incurs the costs of structural issues on behalf of all tenants. The landlord will generally prorate property taxes and building insurance to each tenant based upon their total leased square footage.


3. Triple Net Lease
Arguably the favorite among commercial landlords, the triple net lease, or “NNN” lease makes the tenant responsible for the majority of costs, including the base rent, property taxes, insurance, utilities and maintenance.

This even includes standard property repairs associated with the commercial space in question.

For example, if the roof leaks, the tenant in a NNN lease will have to pay for it to be repaired. Given the costs born by the tenant in a NNN lease, the base rent payment is typically lower on a per square foot basis.

NNN leased properties are often owned by investors who prefer to take a more hands-off approach to management.


4. Bondable Net Lease
A bondable net lease is a variation of the NNN lease, one that places every imaginable risk related to the property on the tenant.

For instance, if the property were to catch fire due to an electrical issue, the tenant would be responsible for the rebuilding effort and would have to continue paying rent to the landlord in the meantime.

Bondable net leases cannot be terminated before the expiration date for any reason. Some landlords use bondable net leases to protect themselves from tenants seeking rent concessions in the event of major structural repairs required under a NNN lease.


5. Full Service Gross Lease
A full service gross lease is one in which the tenant pays a fixed rent each month. The landlord is responsible for covering all other costs, including those related to operations and maintenance.

O&M costs typically include insurance, utilities, management, and state and local taxes. Consider the full service gross lease similar to an all-inclusive resort—pay one flat fee and the rest of the amenities are included.


6. Modified Gross Lease
A modified gross lease is similar to a full service gross lease with one major exception—this lease type makes the tenant responsible for any incremental increase in the building owner’s operational costs beyond the costs calculated in the base year of the lease.

So, if the city increases property taxes, the tenant may be expected to pay a portion of the increase.


7. Percentage Lease
A percentage lease is a type of commercial lease that is most often used by restaurants and retailers.  With a percentage lease, the tenant is expected to pay a base rent – or a minimum amount of rent – in addition to a percentage of the business’s gross income.