A guide to the 3 most common types of commercial leases

If you’re a tenant looking to lease commercial space, it can be challenging to navigate the different lease options offered by landlords. Understanding the types of leases and what they include in the quoted rent is crucial for budgeting. Here’s an overview of the three primary commercial lease types:

Full-Service Gross Lease

• This is the simplest lease type where the tenant pays a fixed lump sum every month.
• The rent includes property taxes, insurance, maintenance, and common area fees (CAMs).
• Some may exclude utilities or other tenant expenses, known as “modified gross leases.”
• Gross leases can have expense caps for tenants to predict costs.

Percentage Lease

• Commonly used in retail, tenants pay a base rent plus a percentage of their gross sales.
• Suitable for those wanting lower rental costs initially, with payments tied to revenue.

Net Leases (Single, Double, Triple)

• These leases involve the tenant paying a base rent and specific building-related expenses.
• Single-Net Lease: Tenants pay base rent and their share of property taxes, utilities, and janitorial services.
• Double-Net Lease (NN): Base rent plus property tax and insurance, but not common area maintenance fees.
• Triple-Net Lease (NNN): Tenants pay base rent, utilities, janitorial, property tax, insurance, and CAMs.

Absolute Net Lease

• Uncommon variation where the tenant is responsible for rent, expenses, and all building repairs.
• Even in the case of building condemnation or disaster, the tenant bears all responsibilities.
• Primarily used by landlords securing debt with rent money.

Regardless of the lease type, all contracts are negotiable. It’s advisable for tenants to consult with a tenant representative broker and legal professional when negotiating lease terms. This ensures a signed deal and a positive, lasting relationship throughout the lease duration.

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Refer to the article: Top list of Industrial Parks in Vietnam