Leasing space for a new business is a big investment, so knowing the types of commercial leases is important. Different factors like the type of building, size, and type of business you run can factor into the type of commercial lease you may need. Before signing a new lease, learn from the experts at Summit Properties what the different types of commercial leases are in Ontario, and what may be best for your growing business.
What are Commercial Leases?
Commercial leases are agreements between the landlord and you or your business. They’re complex legal documents, so it’s important to have support from a qualified commercial real estate lawyer to ensure the best understanding of the commercial lease agreement.
No two commercial lease agreements are the same, though they generally include items like;
- The length of lease
- The amount of rent to be paid
- Additional expenses you may be required to pay, like heat and hydro
- Other responsibilities
Types of Commercial Leases
There are two main types of commercial leases – gross and net.
A gross lease is similar to when you rent an apartment in that you pay a set rate each month and the building owner is responsible for utilities, maintenance and insurance. Gross leases are more common in multiple tenant buildings than in single tenant ones.
Pros and Cons of Gross Leases
With gross leases, you’re paying a single flat fee for the use of the space. So, you have more controlled budgeting. However, with the landlord covering all the expenses associated with the building, a gross lease agreement is usually higher than a net lease. It’s based on an estimate of the costs for utilities, maintenance, insurance and taxes. Gross leases are also generally short-term.
A net lease requires you to pay a share of the expenses of the building and may include utilities, maintenance, common area expenses and more. Net leases are either single, double or triple net depending on how many expenses you’re required to cover.
Pros and Cons of Net Leases
Net leases can help you keep costs down because you have some control over the use of utilities, and only pay the actual taxes and insurance costs. Because the landlord has fewer expenses they’re responsible for, the rent costs can be lower than a gross lease. Net leases are often long term, and some are even transferrable.
Leases for Offices
When looking to lease office space, you could be offered either a gross or net lease agreement depending on the preference of the landlord. In Ontario, triple net leases are the most common form of office lease. With a triple net lease, you’re responsible for your base rent amount and a portion of all expenses to operate the building.
Leases for Retail
If you’re looking for retail, you may encounter a net or gross lease, or even a percentage lease agreement. In a percentage lease agreement (popular in mall locations), you pay a base rent amount plus a percentage of your gross sales.
Whatever type of property you’d looking to lease, make sure you closely review the lease agreement and get legal advice from a qualified commercial real estate lawyer before signing.
Need Help Finding Your Ideal Office Space?
With these considerations in mind, you’ll be on your way to finding a great commercial space in no time. Need additional help? Our team at Summit Properties can assist you in locating the best commercial space to suit your company’s needs. Contact us today at (519) 914-2766 or email us at email@example.com to get started!