Types of Commercial Leases (2)

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Types of Commercial Leases

• By
• Bushore church real estate

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• A commercial lease is a legally binding agreement
  between a landlord and a business tenant for
  the rental of commercial property. Unlike
  residential leases, which are typically used for
  renting homes and apartments, commercial leases
  are used for renting spaces intended for business
  purposes, such as churches, offices, retail
  stores, warehouses, or industrial facilities.

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• Commercial leases can vary widely in terms of
  complexity and terms, depending on factors such
  as the type of property, location, market
  conditions, and negotiating leverage of the
  parties involved. Its essential for both
  landlords and tenants to carefully review and
  negotiate the terms of the lease to protect their
  interests and ensure a mutually beneficial
  arrangement.

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Triple-Net Lease

• Often abbreviated as NNN lease, is a type of
  lease agreement commonly used in commercial real
  estate. In a triple net lease, the tenant agrees
  to pay for all operating expenses associated with
  the property, including property taxes,
  insurance, and maintenance costs, in addition to
  the base rent.

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• Triple net leases are often favored by landlords
  because they shift a significant portion of the
  operating expenses and risks associated with
  property ownership to the tenant. For tenants,
  triple net leases provide more control over the
  property and can offer lower base rental rates
  compared to other lease structures, but they also
  carry the risk of unexpected expenses.
• These leases are common in commercial real
  estate, particularly for properties leased to
  national retail chains, pharmacies, banks, and
  other large tenants.

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• Sometimes referred to as a Full-Service Lease is
  an agreement where the landlord is responsible
  for paying most, if not all, of the propertys
  operating expenses. This typically includes
  property taxes, insurance, and maintenance. The
  tenant pays a single, fixed rental amount,
  simplifying their financial planning as they
  dont have to worry about fluctuating expenses
  associated with the property.

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• A middle ground that combines elements of both
  gross leases and net leases where the landlord
  and tenant share certain operating expenses,
  allowing for greater flexibility in how costs are
  allocated.
• In this instance, the tenant pays a base rent
  amount, and specific operating expenses are
  divided between the landlord and tenant as per
  the lease agreement. Terms can be negotiated to
  fit the specific needs and capabilities of both
  parties. For example, a tenant might agree to pay
  for their own utilities and janitorial services,
  while the landlord covers property taxes and
  major repairs.
• A modified gross lease offers a balanced
  approach, providing tenants with some cost
  predictability and landlords with the ability to
  share the burden of property expenses. The
  flexibility of this lease type makes it a popular
  choice for various commercial properties.

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• Although more common in the retail setting than
  that of a church, a Percentage Lease is when the
  tenant pays a base rent plus a percentage of
  their gross sales. This is a collaborative
  arrangement that benefits both landlords and
  tenants by tying rent to business performance.
  Properly structured, it can create a win-win
  situation where both parties are incentivized to
  maximize the commercial success of the property.

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• Usually, a long-term lease agreement in which a
  tenant is allowed to develop a piece of property
  during the lease period. Unless otherwise
  negotiated, the tenant is often responsible for
  developing and maintaining the property,
  including constructing buildings and other
  structures. At the end of the lease term,
  ownership of the land and all improvements made
  by the tenant revert to the landowner unless an
  extension or renewal is negotiated.