How do commercial landlords price leases?

On Behalf of | Dec 19, 2022 | Real Estate |

As with many things regarding commercial property, lease pricing is more complicated than that used for residential property.

Commercial landlords can choose from one of several ways to price their premises. Not only can that make comparing the price of different properties challenging, but it could leave you tied into paying more than you thought if you did not fully understand the terms before you signed.

There are three types of net leases

Net leases are the most commonly used pricing structure, but even then, there are three to choose from:

  • Net lease: Property taxes are extra.
  • Double net lease: You must add property taxes and insurance to the monthly price.
  • Triple net lease: You need to add property taxes, insurance and maintenance costs to your monthly fee

The more variables in your pricing agreement, the harder it will be to budget for it. Rising energy costs or a tax increase could leave you with premises you can no longer afford. Yet you might also be unable to end the contract early or be required to pay hefty penalty charges to do so.

This is why in many cases, it is better to negotiate a gross lease. This all-in-one price makes budgeting simple. Note that in some cases, even this option can exclude utility bills.

Perhaps the most crucial thing is to understand which pricing method the landlord uses and to understand what that means for you. Getting legal help to review a lease contract before you sign is advisable to avoid expensive surprises later. You might also be able to negotiate for a different pricing structure that gives you more stability.

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