People who are starting a business sometimes can’t afford to purchase a commercial property or simply don’t want to add the stress of real estate ownership to their new venture. In those cases, they may turn to a commercial lease to get the real estate they need.
Signing a commercial lease comes with considerably different terms than a residential lease, so it’s critical that entrepreneurs understand exactly what they’re signing. One part of the lease that may be a bit confusing is the “net” portion of the lease.
Single, double, triple net
There are three different “net” terms that might be included in a commercial lease. Each of these outlines what the tenant is responsible for paying on top of the base rent payment.
There are three expenses that might be passed down – property insurance, property taxes, and common area maintenance fees.
- Single net lease: A single net lease means the tenant is responsible for one of those areas.
- Double net lease: A double net lease means that two of those are passed down to the tenant.
- Triple net lease: A triple net lease means that the tenant pays all three of those.
Typically, base rent for a single net lease is the lowest, but you will be faced with higher extra expenses, so it may not be as good a deal as it seems at first.
Reviewing the terms of the lease is critical for anyone who’s considering a commercial real estate lease. It may help people in this position to have someone look over the lease to ensure they haven’t missed anything.
