Differences between types of Commercial Leases
In commercial real estate you can often come across different terms that may be confusing to the average investor or business owner. Leasing is no different. So in order to simplify the confusion, here is a list of the types of leases you may come across:
NNN (Triple-net) This is a type of lease where the landlord passes on all of the costs associated with the building to the tenant, including property taxes, insurance, and Common Area Maintenance (CAM). There can also be other variations of this type of lease including Double-net or Net lease, meaning that one or several of the above costs is excluded from the contract.
Industrial Gross. In this type of lease the landlord is now responsible for paying the property taxes, insurance and CAM expenses for the building. The lessee is typically still responsible for their utilities and janitorial services. The rate for this type of lease is almost always higher than a NNN lease.
Full Service. This is typically a term used for office space and means that the landlord is responsible for the property taxes, insurance, CAM expenses, and janitorial services for the building. Essentially all expenses are paid for out of the gross rent, yet often times a landlord will have the lessee pay for any increases in the expenses. For example, if property taxes increase, the tenant may be responsible for a certain portion of those increases.
These are templates that are common in the industry, but as with all leases, these terms are negotiable from one lease to the next.
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