Effectively Lease Commercial Real Estate Properties Commercial Real Estate & Property for Lease in India
When leasing commercial real estate, it is important to know the different types of leases and their benefits and drawbacks. The three most common types of commercial leases are net lease, gross lease, and modified gross lease.
Net leases are the most common type of lease, followed by
gross leases. Modified gross leases are becoming more popular due to the
increasing popularity of triple nets (NNN) leases. Understanding these
different types of leases will help you negotiate a better deal when leasing commercial real estate.
Net Lease - Under a
net lease, the lessee is responsible for payment of property taxes, insurance,
and maintenance costs. The term "net" refers to the fact that you are
not responsible for these other expenses. You are basically leasing the space
"net" of all additional costs. Additionally, the tenant must pay any
fees or commissions associated with procuring this lease (such as attorney's
fees).
These leases also often require tenants to pay for their own
utilities. Tenants can sometimes negotiate lower base rent in exchange for
assuming some of these extra responsibilities typically reserved under gross
leases.
Sometimes an allowance will be made in the monthly rental
rate if you can show that your business requires you to offer customer parking
on-site through employee or other means. Tenants may also be required to share
a percentage of their sales with the landlord as additional rent. This is often
referred to as an "adder," because it's added onto the monthly rental
rate.
Gross Lease
- A gross lease requires that a tenant pay all expenses except property
taxes and insurance premiums. Often times, tenants will assume responsibility
for utilities in addition to paying the base rent under a gross lease
agreement.
The advantage of a gross lease is that you are not
responsible for any operating expenses, but there's no negotiation room on the
price of the space unless you can convince the owner that your business
requires special circumstances such as customer parking or access at unusual
hours (for example late night T-shirt printing company).
Modified
Gross Lease (Triple Net) - A modified gross lease, also known as a "triple
net" (NNN) lease, is similar to a standard gross lease; however, the
tenant is responsible for payment of property taxes and insurance premiums.
This type of commercial real estate lease agreement
can be favorable to the tenant because their liability will only increase over
time if there are increases in local taxes and insurance rates. Because tenants
often pay for utilities under this type of lease agreement, they may pass some
or all savings on to customers by way of reduced prices.
When entering into negotiations for leasing commercial real
estate properties it's important that you understand your rights as well as
responsibilities. The more familiar you are with common commercial real estate
leases, the better prepared you will be to make an informed decision when it
comes time to sign on the dotted line.
Understanding common commercial
real estate leases can also help you make your business more profitable by
allowing you to offer budget-conscious services and prices that reflect your
actual costs.
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