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Commercial Leases: Triple Net vs. Gross Leases


Posted: September 28, 2017 by Rebekah Holten

If these two terms are over your head, this may be a good place to start.  These are two very big types of leases that buyer’s should know about.  A triple net rent is a lease in which the one who is renting the space pays rent to the owner (which is usually a smaller base rent) as well as all (or a portion of) taxes, insurance, and maintenance expenses.  The gross lease is a lease in which the tenant pays one lump sum for rent and the landlord pays his expenses (utilities, repairs, insurance and sometimes taxes).   The tenant pays a fixed amount each month and nothing more.  The total rent paid per month should theoretically be the same in both situations.

Advantage of Triple Net:

-          Very transparent as the tenant is the one paying the cost of utilities, property insurance, property taxes and maintenance

-          Tenant can control costs better by controlling their use of utilities

-          Rent is lower (easier to find tenants so less likely to have a vacant building)

-          If the building is in good shape, then maintenance will be minimal and the tenant won’t have a lot of expenses (no major work= no major money spent!)

Advantage of Gross Lease:

-          Makes it easy to forecast the ongoing cost of leasing the space

-          The lease will tell you when the rental rate will increase so you won’t be caught off guard

If you have further questions please contact me at tdaniels@cbcworldwide.com

 

NOTE: the information in this article is intended to give you base knowledge, not legal advice.  Please consult an attorney before you get involved in one of these leases

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