Residential and commercial real estate leasing options often differ in numerous notable ways. For example, in most residential leases, tenants pay fixed rates to a landlord and handle utilities on their own, separately.
Commercial leases have more options, however, due to the additional complexities posed by matters like shared spaces and parking lots.
Gross lease options
Crowd Street discusses different types of leases: in specific, gross and net lease options. Gross lease options provide the tenant with a single fixed cost. This cost will exist regardless of any other factors such as taxes, utilities, repairs and other changing numbers. The landlord holds responsibility for meeting any changes in the cost needs.
Net lease options
Then, there are net lease options. Net leases are the most similar to residential leases, where the landlord only receives the rental payment from any tenants on the property. The tenant then handles the costs for insurance, utilities, property taxes, repairs and maintenance. The lease will outline what portion of taxes and insurance the tenant will cover as well.
There are net lease options that allow for both parties (the tenant and landlord) to assign different portions, allowing for flexibility in the drafting of agreements. Both net and gross lease options allow for adjustments of responsibility for individual item costs.
Each lease has its own potential benefits and downsides. It is important for a tenant and landlord to work out the agreement that will benefit both parties the most and leave the smallest amount of room for any possible future disputes. This will maintain harmony between parties for the foreseeable future.