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Four types of commercial leases that determine payments

You're going to sign a commercial lease for your new business. You're excited, thinking about the future of the company, and you want to act quickly to lock down the property before someone else does.

While moving quickly may be wise, make sure you take the time to really consider the structure of the lease and what obligations it gives you. There are four main types of commercial contracts that help to determine what you'll pay for that property.

  • A single net lease. Along with your standard monthly payment, you have to cover the cost of property taxes and utilities.
  • A double net lease. This is the same as the above, but you also have to pay the insurance premiums. In a single net lease, they'd be covered by the owner, but the double net lease shifts that burden to you.
  • A triple net lease. This lease adds in the cost of maintenance and repairs. Any costs that are related to the building are yours to pay. Typically, the only thing the landlord has to worry about is making a structural repair.
  • A full service gross lease. This is also often called a modified gross lease or a modified net lease. This one divides the costs between you and the property owner or landlord. Divided costs could include property taxes, structural repairs, standard maintenance -- especially in common areas -- and monthly utilities. This divided cost is often referred to as "base rent."

There are many other factors to consider when signing a lease, but this gives you a solid place to start. Be sure you're fully aware of all obligations before you sign.

Source: Forbes, "Negotiating A Commercial Lease? Here's What You Need To Know," My Say, Oct. 31, 2017

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