January 13, 2022 at 4:17pm | Danesha Ritzberg

There are different lease types in commercial real estate. Different property types use different lease types and everything is negotiable, so you can mix the different lease types to create the best lease for you and your business. Here are the different lease types.

  • gross lease
  • full-service lease
  • triple net lease
  • modified lease
  • percentage lease

Full-Service Lease

In a full-service lease, the landlord directly pays all costs associated with the operation of the building and the property.
Although the landlord pays these costs, the tenant is actually covering those costs in the rental rate being paid.
The landlord takes care of the administrative and billing processes and charges the tenant accordingly. More clearly stated, these costs are factored into the rental rate quoted and paid by the tenant.

  • An industrial lease is often a form of modified gross or a modified net lease structure, whereas an office building lease is usually full service.
  • Although the words gross and full service are different, the meaning is basically the same.
  • Common usage of these phrases usually relate full service to office space and gross to industrial space, but this varies by market and by property, so the terms of lease itself must be clearly understood.

Triple Net Lease

Another one of the most common leases is the Triple Net Lease arrangement. In this type of lease, the landlord wants to net a certain amount per month, so the landlord requires the tenant to pay certain extraneous expenses, typically these are taxes, insurance, and maintenance.
  • These expenses are meant to include all those operating expenses incurred by the owner by simply owning the property.
  • Triple net leases can be used for ground leases, office buildings, retail leases, or whatever type of property the parties may elect to lease. It would be unusual, however, to have a triple net lease for a multi-tenant, multi-level office building.
  • Triple Net Lease/Net Lease: Tenant pays taxes, insurance, maintenance (Maintenance often includes repairs, utilities, and operating expenses.)

Gross Lease

A gross lease is an agreement that requires the tenant to pay the property owner a flat rental fee in exchange for the exclusive use of the property. The fee includes all of the costs associated with property ownership, including taxes, insurance, and utilities. Gross lease: Landlord (owner) pays taxes, insurance, maintenance, operating expenses

Modified Lease

A modified gross lease is a type of real estate rental agreement where the tenant pays base rent at the lease's inception, but it takes on a proportional share of some of the other costs associated with the property as well, such as property taxes, utilities, insurance, and maintenance.

Percentage Lease

A percentage lease is a type of lease where the tenant pays a base rent plus a percentage of any revenue earned while doing business on the rental premises. It is a term used in commercial real estate.

There are also less popular lease types like land lease. If you are interested in a commercial lease for your business please reach out to Ritzberg Realty at 404-853-8619. If you're an agent who's interested in learning more about how to negotiate a commercial lease sign up for my course.

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