Types of Commercial Real Estate Leases

There exist 3 basic types of Commercial real estate leases according to Ray Martin. These are classified around two rent calculation systems: This includes the "gross” and “net". Whereas, the gross lease suggests that tenants pay rent by making one lump sum payment while the Real Estate takes care of expenses from the amount paid. The net lease, on the other hand, has a smaller base rent, the tenant pays for his expenses. The modified gross lease is like a marriage-like partnership.

Gross Lease or Full-Service Lease

Here, the rent is all-inclusive. The Estate pays all or most expenses in relation to the property, including insurance, taxes, and maintenance from rents received paid by tenants. Tenant pays his property taxes and insurance.

Net Lease

In net lease, the Estate charges a lower base rent for the commercial space and some or all of the regular expenses associated with maintenance, operations.

Net leases:

Single Net Lease (N Lease)

The tenant makes a base rent payment and a pro-rata share of the building's property tax (i.e. tenant takes a portion of the total bill based on the proportion of total building space leased); The Estate covers all other building expenses. The tenant also pays utilities and cleaning services.

Double Net Lease (NN Lease)

The tenant makes a base rent and a pro-rata share of property taxes and property insurance. The Martin Caselli Real Estate covers expenses for structural repairs and common area maintenance. The tenant once again is responsible for their cleaning and utility bills.

Triple Net Lease (NNN Lease)

It is known as the net net net lease, or NNN lease, the tenant pays all or part of the three "nets"--property taxes, insurance, and CAMS--on top of a base monthly rent. Tenants pay the costs of their own occupancy, including cleaning services, utilities, and their own insurance and taxes.

Absolute Triple Net Lease

Here, tenants bare every imaginable real estate risk, from construction expenses to rebuilding in case of disaster etc.

Modified Gross Lease

A gross lease in which rent is requested in one lump sum, which can include any or all of the "nets"--property taxes, insurance, and CAMS. Utilities and cleaning services are typically excluded from the rent, and covered by the tenant.

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