There are three primary types of commercial property leases, each requiring different levels of responsibility from the landlord and the tenant.
- Full service leases. The tenant pays only rent and the property owner provides all services and pays all operating expenses. Modified (full-service) leases. The tenant pays only rent and the landlord recovers from the tenant specific expenses identified in the lease. These expenses are generally prorated on the basis on the rentable square feet.
- Gross leases. The tenant pays only rent and the landlord pays for the building’s real estate tax, insurance and maintenance
- Net leases, single, double or triple-net (NNN), i.e. leases with operating expenses recoveries.The tenant pays a rental base lower than for a full service or gross leases but agrees to pay a range of operating expenses, such as real estate taxes, insurance, repairs and maintenance of the space and also common area maintenance expenses.
Real Estate Finance and investments by Willam B. Brueggeman/Jeffrey D. Fisher