Types of leases you might find in Commercial Real Estate

Today we’re going over some vital information to real estate brokerages and business alike. Lease types in Commercial Real Estate.

Let us know if you’ve encountered any of these lease types.

Triple net lease (NNN)

In a triple net lease, the tenant is responsible for paying the base rent to the landlord, plus three key expenses: the cost of common area maintenance, property taxes, and building insurance.

Absolute net lease

In an absolute net lease, the tenant is responsible for almost everything. That includes the base rent, plus the costs of a triple net lease as described above. On top of that, the tenant is on the hook for any major repairs to the property, such as replacing the roof, structure, and windows.

Modified gross lease

A modified gross lease is a more straightforward and flexible agreement between a tenant and a landlord. Under a modified gross lease, the rent quoted includes everything—that is, the base rent, common area maintenance, property taxes, and building insurance—but typically excludes utility bills or other costs.

Full-service lease

A full-service lease is a type of gross lease in which the rent is paid as a single lump sum to the landlord, who uses that money to cover every expense involved in the property’s operation. This includes the base rent, maintenance, property taxes, building insurance, and utilities.

What is a triple net (NNN) lease?

The triple net lease is the most common type of lease you’ll encounter when searching for commercial real estate. This type of lease requires the tenant of a property to pay for three net costs on top of their base rent. Those costs are taxes, maintenance, and insurance.Triple net

lease operation

In a typical triple net lease, the additional costs of maintenance, insurance, and taxes are passed through to the tenant every month and are proportional to the tenant’s share of the whole building. In this way, the base rent and the three nets are paid for simultaneously. This isn’t always the case. In some triple net leases, the additional expenses can be charged to the tenant on a quarterly or annual basis.