What are the Different Lease Types?

    Posted by Sarah Beth Ruffin on January 7, 2020
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    We’re kicking off this new year with a back-to-basics blog post: commercial lease types. Full Service/Gross, Modified Gross, Triple Net, Double Net, Single Net - all these terms floating around can have you reaching for a CRE dictionary!

    Here we’ll try to break it down for easy reference. linville-team-partners-building

    Full Service Lease
    • This can also be called a Gross Lease 
    • All-inclusive, “turnkey” for the tenant
    • Landlord pays all or nearly all expenses
      • Landlord expenses include tax, insurance, maintenance
      • Also includes utilities and usually janitorial
    • The tenant strokes one simple check per month, and all expenses are covered when it comes to operations at the property (typically phone/internet is not included)
    • Responsibility and risk weighs heavily on the landlord
    Modified Gross
    • Typically can negotiate which items are included in base rent (e.g. taxes, insurance, common area maintenance)
    • Utilities and janitorial normally covered by tenant
    • This structure allows for flexibility from the tenant’s perspective
    N Lease (Single Net) 
    • Tenant incurs base rent plus property taxes for occupied portion of property (their pro rata share)
    • The tenant is responsible for utilities and janitorial
    • Landlord typically covers property insurance, common area maintenance, and structural repairs
    NN LeasE (Double Net) 
    • Tenant pays the base rent + property taxes + property insurance for their leased portion
    • The tenant is responsible for utilities and janitorial
    • The landlord typically covers common area maintenance and structural repairs
    LT Bojangles-11
    NNN LeasE (Triple Net) 
    • Tenant is responsible for base rent plus property taxes, insurance, & common area maintenance
    • Tenant also pays for utilities, janitorial services, HVAC, repairs and upkeep
    • This structure allows cost savings to be passed on to the tenant

    In all of these cases, the tenant is responsible for their business’s property insurance, business taxes, and licenses (non-building related). There is no one clear “best” lease type, and they often vary by property type. We are happy to help you decipher and negotiate your next lease deal, as either a landlord or tenant!

     

    Sarah Beth Ruffin

    Written by Sarah Beth Ruffin

    Sarah Beth joined the LTP team in April 2019. As the Research & Contact Coordinator, she partners with our brokers in their prospecting efforts and conducts research to help keep our company tuned into the heartbeat of our market.