Types of Commercial Real Estate Lease

Tim Vi Tran, — Mon, 11 Feb 2013 08:39:16 +0000

Have you ever wondered what type of commercial real estate leases are best for the landlord? What about the tenant? Below are the different types of leases for your consideration.

TYPE	DESCRIPTION	TYPICAL USAGE
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.
Gross Lease	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.Modified Gross lease is also used when landlord bills tenant for “increases” of expenses from base year.	Typically used in medical and industrial buildings.
Net Lease	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 Insurance.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 to tenants.	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.
Ground Lease	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.

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Happy Lunar New Year 2013

Tim Vi Tran, — Sun, 10 Feb 2013 19:51:33 +0000

Happy Chinese New Year, year of the Water Snake!

Gong Hey Fat Choy (Cantonese)

Gong Xi Fa Cai (Mandarin)

Chuc Mung Nam Moi (Vietnamese)

Wishing you peace, success and prosperity in the Year of the Snake in 2013!

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Types of Commercial Real Estate Lease

Happy Lunar New Year 2013