When someone signs a commercial lease, it is clear that they are responsible for the monthly or annual lease payment. They are paying to rent that space from the property owner.
But other costs can be a bit less clear. Who has to pay property taxes, for instance, the person who is renting the space or the one who owns the property itself? Who has to cover the cost of maintenance and upkeep, especially if something goes wrong and there is a major problem with the property? Commercial properties also need significant insurance policies, so is it the tenant or the landlord who is responsible for paying the insurance company?
It depends on how the lease is structured
The reality is that these costs can be divided up in different ways, depending on how the lease was written.
For example, with a single net lease, most of the costs fall on the property owner. The tenant does not bear nearly as much responsibility, as they are just paying for the opportunity to use that space.
But with a triple net lease, which may be used in a long-term arrangement, far more costs are shifted to the tenant. They will also need to pay for maintenance and upkeep, insurance policies and property taxes.
This can often lead to conflicts if a tenant does not understand what type of lease they have signed and does not realize what they are responsible for. They may believe that it is up to the property owner to pay taxes or insurance, for example, meaning that they could get behind on their tax payments or allow an insurance policy to lapse.
Drafting the lease
This helps to show why it is so important for all parties involved to understand exactly what legal steps to take when drafting or signing a lease, as the provisions within it can have a significant impact on their financial responsibilities moving forward.