Gross leases typically have a higher monthly lease charge. In a gross lease, the landlord typically pays all the related building expenses, including CAM, Insurance, and Taxes. It is often more convenient for a tenant to pay just one bill, as only one check is cut.
A modified gross lease requires the tenant to reimburse landlord for “pass through” costs over a stated expense stop or base year. The key is to properly determine your base year expenses. In this scenario there is more risk sharing if expenses go up.
A “Net Lease”, also called a “Net Lease”, or “Triple Net Lease”, has the tenant responsible for paying the taxes, CAM, and owners insurance on the building, or the “net’s” (CAM, insurance and taxes). Often times a landlord will submit to the tenant what the “Net” charges are on a yearly basis, and pro-rate the charge over the course of the year. Often this is done on a “square foot” basis, where all expenses are totaled, and then divided by the leasable square footage.
With a “Net Lease”, it is key that the tenant have a clear understanding of what the is included in the “Net” charges, and have them spelled out in a lease. Note: A good Commercial Real Estate Attorney should assist in this, one who is well versed in leases in your area, they are well worth the cost and will save you money and headaches in the future. “Net” charges are often disputed and hashed out. Be clear up front.
Also, when dealing with a lease, you will often hear a “per foot” charge, or a monthly charge. If you don’t deal in leases, simply multiply the “per foot” charge by the total square feet you are leasing by the charge to come up with your yearly rent. Then divide by 12 for your monthly rent.
Assure that you are asking the right questions when leasing. I suggest getting an experienced broker involved in your lease and an experienced attorney. Remember, typically you do this just a few times and you need someone who has done this many times to help you through the process.
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