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What Are The Different Types Of Commercial Leases In California?

What Are the Different Types of Commercial Leases in California?

On behalf of , P.C. posted in Commercial Real Estate on Sunday, September 19, 2021.

Not all commercial lease agreements are the same. In fact, there are several different types of commercial lease agreements available in the state of California. Which lease is right for you depends on your financial situation and how you want to distribute the responsibilities for items outside of rent between landlord and tenant.

Before signing any lease agreement, you should talk to an experienced California real estate lawyer, especially if you are leasing a commercial space for the first time. An experienced attorney can review your situation, your business needs, and your goals, then advise you on which lease may be right for you.

At the Law Office of David C. Winton, we have more than 60 years of combined experience handling the legal concerns of clients throughout Northern California. If you are ready to expand your business or are looking for a commercial property to rent, contact our team for a consultation regarding your leasing needs.

 Commercial Lease Types in California

Commercial leases are not one-size-fits-all. Instead, there are three primary types of commercial leases, each with its own set of advantages and drawbacks. The type of lease you should sign will depend on your financial situation and your personal goals. The most common commercial lease types include:

Gross Lease – In a gross lease, the landlord is ultimately responsible for paying all the property expenses. A gross lease is sometimes also referred to as “all-inclusive.” This is because it will be the landlord’s job to pay for taxes, insurance, and maintenance of the property. The tenant is only responsible for writing a monthly check to cover rent.

Gross leases can be beneficial for tenants who know or can accurately predict what their monthly income and expenses are going to be. Tenants do not have to worry about unexpected costs or sudden repairs.

Net Lease – The most common net lease is the Triple Net lease or the NNN lease. In addition to monthly rent, this type of lease requires that the tenant pays for the three “nets”. The three nets typically include property taxes, insurance, and common expenses. In an NNN lease, a tenant must foot the bill for any unexpected repairs or maintenance. This type of lease involves a degree of unpredictability because a tenant may not be able to anticipate the particular expenses that could occur during the term of the lease.

Less common net leases include the single net lease, which requires a tenant to pay rent and a pro-rata share of property taxes. There is also the double net lease, which has the tenant pay base rent in addition to a pro-rata share of property taxes and property insurance.

Modified Gross Lease – A modified gross lease is a type of hybrid lease that combines elements of an NNN lease and a gross lease. Generally, a modified gross lease stipulates that the landlord and the tenant will share property expenses between them. Common examples of tenant expenses under a modified gross lease include utilities and cleaning services.

How A Lawyer Could Help You with a Commercial Lease

Signing a commercial lease agreement is a huge step for your business. An experienced California real estate attorney will take the time to review your financial situation and business goals. With this information in hand, an attorney can explain which type of lease may be most advantageous for your business.

An attorney can also review any potential lease agreements that are on the table. The last thing a business owner wants to deal with is unexpected or unpredictable expenses. By working with a trusted real estate lawyer, you can enter into a lease agreement fully understanding the expectations a landlord will place upon you. Just as important, you will also be aware of your rights as a tenant.   

Contact Winton Strauss Law Group

Don’t let yourself become trapped in a lease situation that does not fit your needs. Before you sign on the dotted line, talk to a skilled California real estate lawyer. At the Law Office of David C. Winton, we want to help you find a lease option that meets your needs and will allow your business to flourish and grow. Contact us online to set up an initial consultation.


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