One of the most important decisions that a business owner can make is the location of their business. For some, the answer to a location concern isn’t to purchase a property. Instead, they may opt to rent a property.
A commercial lease is much different than a residential lease. Commercial leases are usually negotiated and may place major financial duties on the tenant in addition to the lease payment.
Net lease terms
One of the most common structures of a commercial lease is a net lease. These are termed single net, double net and triple net leases. Those terms have to do with the number of added expenses the tenant is responsible for. These can include property taxes, insurance and maintenance.
In addition to those “net” terms, some commercial leases also require the tenant to pay for utilities, repairs and common area expenses. Another addition, which is common for food service business, is a percentage of the profit of the business.
The commercial lease should clearly state the base lease amount, as well as all expenses the tenant is responsible for paying. It should also include how these expenses are calculated, billed and documented. Some commercial leases will have caps on how much the tenant can be billed.
Commercial leases are often complex, so it’s best for anyone who’s considering signing one to have someone on their side who can review an entire lease. It’s best to do this early in the process so a plan can be made for any negotiations that might be necessary.