People who are looking for a commercial lease will likely encounter terms that are much different than a residential lease. Many commercial landlords use a net lease, which means that some or all of the expenses related to the property are covered by the tenant instead of the landlord.
It’s critical that anyone who’s considering a commercial lease carefully reviews the terms to determine what they’re going to be responsible for paying. Net leases can vary greatly, so never take time to read over the document before signing it.
Types of net leases
Net leases are set based on how many additional categories of expenses the tenant is responsible for besides their rent amount. There are categories: insurance, taxes and maintenance.
- N lease: A single net lease requires the tenant to pay one set category of additional expenses.
- NN lease: A double net lease requires the tenant to pay two set categories of additional expenses.
- NNN lease: A triple net lease requires the tenant to pay all three categories of additional expenses.
The lease should specifically state what categories the tenant is responsible for. It should also include how the payments must be made and when they must be paid.
It’s a good idea to have someone familiar with commercial leases review the lease. This is one way that entrepreneurs can ensure they understand the lease in its entirety so they can uphold their end of the contract. It’s also a way they can ensure they know what the landlord is responsible for and what types of remedies are options if there’s a dispute about or a breach of the lease.