One key difference between commercial and residential leases is you can usually negotiate terms in a commercial lease, including the type of lease. If you start a new business in Indiana, the terms of your commercial lease can have an impact on the success of your business.
Gross and net leases
A gross lease involves paying a fixed monthly rent with the landlord covering additional property expenses such as insurance and taxes. The landlord is also responsible for the cost of upkeep on the building. The utilities can be paid by either the landlord or the tenant.
The benefit of a fixed lease is that it offers predictability since you pay the same amount of rent each month. Your budget is also simpler because you do not need to factor in the additional costs.
A net lease involves paying rent plus some additional costs. Net leases are usually classified as single, double or triple.
Types of net leases
In a single net lease, a tenant pays the rent and property taxes. A double net lease involves paying taxes and insurance while a triple net lease involves paying taxes, insurance and maintenance.
Although a gross lease might sound like the more attractive option, a main disadvantage of a gross lease is that your rent is likely to be higher since the landlord takes on the additional costs.
Therefore, as a tenant, you might save money by choosing a net lease. Your overall monthly payment might be lower even though you are paying more expenses.
Additionally, a net lease offers you more flexibility and control over the property. You can also choose how efficient you want to be with your expenses, especially if you are responsible for utilities as part of your net lease.
Commercial lease negotiations
Deciding between a gross or net lease is just one choice you will need to make when negotiating a commercial lease. Negotiations can be nuanced and complex and require careful consideration. Ultimately, your commercial lease should reflect your business needs and goals.
