Types of Leases

“There is no such thing as a ‘Net’ Lease”.  If someone tells you they have a “net” lease for sale, call bull….., and check your back pocket.  I like to think of terms like this as “slang”.

Real estate is a wonderful world where everyone is very sure of their definitions and nomenclature, and it is only decided when the attorneys join in.  Countless Developers/owners/occupiers and Associations have piled on to “define” what the term Net, or Net Net, or Net Net Net, means but:

A Lease is a negotiable document that defines Occupancy by a Tenant.  The costs of occupancy are described within the lease, and it is up to you and your broker to determine the potential costs and wether it fits your budget.

I could sit here and tell you that a “Full Service Lease”- Gross,  is the best for tenants because it limits the costs of occupying and the Landlord has the responsibility of maintaining the property.

I could tell you that a “Net” Lease best for the Landlord because the cost of maintains the property is the burden of the occupier.

I could tell you that a “Modified Gross” splits the difference with taxes, insurance, Common Area Maintenance, Structural etc are assigned to the Landlord or the Occupier given specific circumstances ie, is it a multi-tenanted  building etc.

I could tell you what NAIOP says about net leases-   https://www.naiop.org/en/Magazine/2017/Summer-2017/Marketing-Leasing/The-Benefits-and-Risks-of-Triple-Net-Leases

I could tell you what the second “Net” according to BOMA

I could tell you what the third “Net” according to ICSC is – well you get the idea. (https://www.icsc.org/search?type=articles&query=Net%20lease&from=0)

Bottom line:  you have to read the lease and or proposal diligently and ask a lot of questions.  This is why you hire professionals.  Entering into lease negotiations with a landlord without proper representation on your side is something that is very shortsighted even if you are the most experienced in the business in the negotiations – you need several sets of eyes on real estate documents to make sure you understand everything and don’t miss something that could affect your occupancy in a negative manner over your term.  Hire a good Broker. 

Wikipedia definition of net lease.   

https://en.wikipedia.org/wiki/Net_lease