What Is A Net Lease ?
Net lease is always used for commercial property wherein the tenant besides paying the rent also takes over paying some or all of the expenses related to the property. |
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These expenses, under normal circumstances, would have been borne by the landlord. The expenses include insurance, taxes on the property, repairs, maintenance, utilities and anything else that fall under the purview of the lease agreement.
Usually the items that the tenant has to pay are mentioned in the lease agreement. In case the commercial property has more than one tenant as in shopping mall, the expenses is shared between the tenants in a prorated manner depending on the size of the area taken by each tenant.
The lease is called net lease because the amount the landlord receives is after the tenant deducts the amount to pay for the expenses. So, the landlord gets net amount. This is on contrast to the gross lease, where the tenant pays the gross amount to the landlord so that he can pay for the expenses associated with the property.
There are different types of net lease in the commercial real estate sector. For instance, in the single net lease, the tenant is required to pay the rent as well the property taxes. Then there is double net lease where the tenant pays the property taxes and building insurance beside the rent. Any other expenses related to common area maintenance and repairs to the property are borne by the landlord. In the triple net lease, also referred to as net-net-net lease, the tenant is responsible for the property taxes, building insurance and maintenance. In addition, the tenant also pays the rent. In this type of lease agreement, the tenant is responsible for structural repairs and paying for the common area maintenance.
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