Below are a few examples of common types of commercial leases.
|Fixed - Full Service - Flat Lease
|Tenant pays a base rent only, all expenses, including the tenant use of
utilities, are paid by the landlord.
||Typically used in large office buildings.
||Tenant pays a base rent and all expenses are paid by the landlord.
However, tenant pays its own use of utilities, like gas and electric.
|Typically used for office/retail buildings.
|Modified Gross Lease
||As name implies, a modified lease is a Gross Lease but “modified”
to pass-through certain expenses to the tenant, like janitorial and
repairs, or others negotiated before signing the lease.
lease is also used when landlord bills tenant for “increases” of
expenses from base year.
|Typically used in medical and industrial buildings.
||Tenant pays a base rent plus some or all operating expenses for its
percentage share of property (prorata).
If it is a Single Net Lease (N),
tenant pays base rent plus one of the operating expenses, either
property tax, Insurance or CAM charges.
In a Double Net Lease
(NN), tenant pays base rent plus two of the operating expense, usually Property Tax and
In a triple Net Lease (NNN), tenant pays for all operating expenses. Most of
the time, in a NNN lease capital improvements, such as new roof, will not be billed back
|Typically used in retail shopping centers.
|Absolute Triple Net (NNN)
||Tenant pays base rent and pays all the operating expenses
including capital improvements. In this type of lease, landlord
doesn’t even see the bills; tenant pays the property tax, insurance,
CAM and capital improvements directly to vendors.
|Typically used in Single Tenant properties and Sale-lease back
transaction with long leases.
||Another version of Absolute Triple Net Lease where the landlord
leases the ‘grounds’ only, technically the building belongs to the
tenant, when lease is over the building “reverts” back to the
landlord. In this scenario, the tenant gets to depreciate the building
not the landlord.
||Typically used for single tenant property.