Types of Commercial Lease Agreements
Whether you have a commercial property available to lease or you are searching for a commercial property to run your business, there is a commercial lease agreement that will suit your needs. Generally, commercial leases can fall into one of five categories.
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Cost-of-Living Lease
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The cost-of-living lease is just as it sounds; it rises with the cost of living. As the costs of the property increase, such as taxes, insurance, and so forth, then the cost would increase accordingly for the tenant.
Gross Lease
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With a gross lease, the landlord would be responsible for the operating costs of the building and charge the tenant a flat amount each month. It is possible that the landlord would order the tenant to pay for gas and electricity. The landlord may also have a clause in the lease that would allow him to increase the monthly amount every year due to rising costs.
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Step Lease
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In a step lease, the tenant pays a set amount each month. For the duration of the lease, the landlord adds a predetermined amount to the rent each year. This increase is not based on actual costs, but rather an estimate of the landlord's anticipated increase in costs.
Net Lease
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A net lease requires a tenant to pay some, but not all, of the expenses plus his monthly rent. When the landlord incurs increases in his costs, then he will increase the rent. However, these increases are not based on estimates. Depending on how much space the tenant is using, the landlord may request the tenant pay some or all of the property taxes.
Net-Net Lease
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In a net-net lease, not only does the tenant pay a monthly rent, he also is responsible for all of the operating costs that the landlord may incur. This would include, but is not limited to, building maintenance, insurance and property taxes.
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