Finding office space for the first time can be very daunting. Adding to the confusion of where to locate your business is the myriad of types of leases that are out there. In general there are 6 different types of leases for commercial space. The first 5 typically apply to office space and the sixth to retail space. The following is a general overview of the types of leases. It is important to fully read any rental agreement and understand exactly what is in it prior to signing anything.
Full Services Lease
A full service lease is just that, full service. The tenant pays a single lump sum every month and the landlord takes care of everything. This is a typical lease for office space with multiple tenants. It has the advantage of allowing a tenant to easily budget for their space costs.
In this situation the tenant pays a fixed amount every month plus the costs of utilities used. The landlord is in charge of paying for insurance, taxes, maintenance and any other costs associated with the property.
This is one step beyond the gross lease. Now the tenant pays their percentage of property taxes in addition to rent and utilities. If a tenant occupies 35% of the building they will pay for 35% of the property taxes.
This is the next level of a net lease. Here the tenant pays a percentage of property tax plus any increases in insurance costs.
Under this arrangement the tenant will pay a percentage of property tax, insurance and the associated costs of maintenance and repairs.
Percentage leases are interesting because the tenant will pay a fixed rental fee plus a percentage of sales. This type of lease is most popular among high profile retail spaces. The tenants should be careful about the wording since the percentage is typically taken from gross sales and not net sales. There may also be some extra charges for taxes and other related fees. These leases also typically will have language about operating hours, deliveries, signage and use of common spaces.