Types of Leases

Flat or Fixed Leases

• A single rent is set for a definite period of time.

Gross Leases

• The tenant pays a flat monthly amount.
• The landlord pays for all operating costs for the building.
• In some cases, the tenant pays for its electricity, heat, and air conditioning.
• This type of lease often contains an escalation clause that allows the landlord to increase the rent annually to offset increased expenses.

Step Leases

• The rent is increased at a set amount on an annual basis during the life of the agreement.
• The increase is to cover the landlord's expected increases in expenses.
• The increase is based on estimated rather than actual costs.

Cost-of-Living Leases

• The rent is tied to rises in the cost of living.
• The rent goes up with general inflation.

Net Leases

• The tenant pays a base monthly rent plus some of the expenses.
• The increases are based on actual costs rather than on estimates.
• The rent increases at the time that the landlord incurs an increase in costs.
• In some cases, the tenant pays rent plus all of the real estate taxes.
• If leasing only a portion of the building, the tenant will pay a proportionate share of the taxes.

Net-Net Leases

• The tenant pays the base rental amount, real estate taxes, and insurance premiums.
• The insurance and real estate taxes are allocated among the tenants based on the proportion of space occupied.

Net-Net-Net Leases

• The tenant pays the base rental amount plus the landlord's operating costs.
• Included in this amount are real estate taxes, insurance, maintenance, and repairs.

Percentage Leases

• The tenant pays either a base amount and a percentage of gross income or, depending on which is higher, pays a base amount or a percentage of the business's gross income.