How do you price a commercial lease?

| Apr 26, 2021 | Commercial and Residential Leases |

When looking to lease a commercial property, you need to read the contract’s fine print with care. Landlords can place significant restrictions on what you can do with the premises. It could also turn out far more expensive than you thought if you do not understand the pricing system.

If the price of a rental space is far more attractive than similar ones in the area, it could be because the landlord has priced it differently. Not all commercial property owners price their premises in the same way. 

There is more than one way to calculate rent on a commercial property

Some landlords prefer a more inclusive price. Others like a low-sounding base price with lots of add ons. Here are the different ways commercial landlords might use to price a space:

  • Gross lease: You pay the landlord a set amount each month, and they take care of property taxes and ensuring you have a well-maintained space. (Double-check who pays the utility bills, however.)
  • Net lease: These are uncommon, but the base rent may be lower because the tenant is also responsible for property taxes.
  • Double net lease: Property taxes and insurance are extra on top of the rent (and usually divided according to the space each tenant occupies).
  • Triple net lease: Property taxes, insurance, and maintenance costs are extra and not part of the base rent.

In addition, mall owners often stipulate you pay a percentage of your takings on top of the cost of the lease.

Whichever type of commercial lease, seek legal help to review it first. Ensure you understand how long the prices will apply and how much the landlord can increase them. Contracts are a trade-off between the landlord’s best interests and your best interests. A lease is a legal document, so make sure you know how you can escape the contract if your business does not go as well as hoped.