There are several types of commercial rents, and the type used often depends on the nature of the business and the specific lease agreement. Here are some of the most common types:
- Gross Lease or Full-Service Lease: In this type of lease, the tenant pays a single lump sum rent that covers all property-related costs, such as utilities, property taxes, insurance, and maintenance. The landlord pays these expenses out of the rent received. This type of lease is common in multi-tenant office buildings.
- Net Lease: In a net lease, the tenant pays the base rent plus a portion of the property’s operating expenses, such as property taxes, insurance, and maintenance. These leases are often further classified into single net (N), double net (NN), and triple net (NNN) leases, depending on how many of these additional costs the tenant is responsible for. Triple net leases are among the most common in commercial real estate.
- Percentage Lease: In this type of lease, the tenant pays a base rent plus a percentage of their business’s revenue. This arrangement is most common in retail, particularly in shopping malls.
- Modified Gross Lease: This type of lease is a compromise between a gross lease and a net lease. The tenant pays a base rent, and the landlord and tenant each pay a portion of the property’s operational costs.
- Absolute Lease: Also known as an “absolute net lease,” “bond lease,” or “hell-or-high-water lease,” this lease type places all responsibilities—repairs, maintenance, insurance, and taxes—on the tenant. It’s like a triple-net lease, but even more comprehensive. The tenant is responsible for every conceivable real estate risk, just as if they were the outright owner of the property.
The most common types of commercial rent depend on the specific business sector, with triple net leases being common for freestanding commercial buildings and gross leases often seen with multi-tenant office buildings. Ultimately, the type of lease agreed upon is usually the result of negotiation between the landlord and the tenant.
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