As a commercial real estate owner, your main goal may simply be to lease that space to someone who wants to run a business. You are not looking to sell the property entirely, but you see it as a long-term source of income. As long as you can have tenants in the space, you generate consistent revenue.
When drafting a commercial lease, then, it is important to be very clear about what financial obligations will be handled by each party. There are different ways to write a lease, depending on how you want to divide various costs and expenses.
A triple net lease
One example of a commercial lease is known as a triple net lease. This means the tenant is obligated to pay far more than just the monthly cost for the space itself. They are also responsible for:
- Property taxes that are assessed on the building
- The necessary insurance that must be carried on the property
- Maintenance and repair costs that could arise while the tenant is using the property
Because these other costs are included, the base rent payment is typically lower. A standard lease may have a very high rent payment because the owner then takes a portion of this monthly income and uses it to pay property taxes and maintain the building itself. But if the tenant is responsible for covering those costs, their monthly rent is typically lower because there are relatively few costs for the owner to cover on their end.
Both tactics can be a viable way to lease commercial property. It is just important to be clear upfront about how costs will be divided so that both parties are on the same page. When drafting a commercial lease or addressing a dispute, be sure you know what legal options you have.
