Landlord Tenant Lawfirms .com Part of Nolo Logo

Commercial Net Leases

Talk to a Landlord and/or Tenant Lawyer
Enter Your Zip Code to Connect with a Lawyer Serving Your Area

Related Topics

Related Ads

Unlink a gross lease, in a commercial net lease, the tenants are responsible for paying for some of the operating costs of the building. The most common operating costs include:

Property Taxes - Tenants must pay their portion of property taxes, usually based on how much of the rentable space (or of the entire property) they are leasing.
Insurance - Similarly, liability, property and casualty insurance will be allocated amongst the tenants and landlord.
Maintenance - Maintenance costs will usually be negotiated heavily, with landlords wanting to "pass through" all costs to the tenants, while tenants want to get as many "exclusions" as possible.

When all three of these expenses are included in a net lease, it is referred to as a "triple net lease". Negotiating the terms of these leases is tricky, and you'll want to know all of your options to help minimize your liability for expenses.

Basic Elements of a Commercial Net Lease

Here are the expenses you will need to negotiate if you're going to get into a commercial net lease.

Triple Net Leases: Taxes
A common way to place tax responsibility on the tenant is for the landlord to agree to pay all real property taxes for the first year of the lease. Then, after the first year, you pick up all or a portion of any increase.

Property and Casualty Insurance
Property and casualty insurance covers the building for fire, smoke damage, explosions, and other disasters or "perils." The policy won’t cover perils that it specifically excludes, such as damage from floods.

Liability Insurance in a Net Lease
If someone is injured on the landlord’s property, you and/or the landlord may be sued. Or, if you or the landlord accidentally damage or destroy someone else’s property while it’s on the rented premises, the owner may sue you over its loss.

Dividing Maintenance Costs Between Landlord and Tenants
In addition to taxes and insurance, there is a third ingredient in a net lease—operating costs. This is your share of the cost to maintain the building’s upkeep, including common areas such as lobbies, hallways, garages, and elevators.

Helpful Do-It-Yourself Products from Nolo

If you're considering getting into a commercial lease, Nolo's got books and legal forms that can help.

Negotiate the Best Lease for Your Business
Attorney Janet Portman has put together an excellent book for anyone negotiating a commercial lease. It covers all the important terms to ensure you get a favorable agreement.

Commercial Net Lease for Entire Building
This form contains everything businesses and landlords need to create their own net lease for a building. In a net lease, the tenant not only pays rent, but also part of the building's operating costs. These costs include property taxes, insurance and maintenance.

Commercial Net Lease for Part of Building
This form contains everything businesses and landlords need to create their own net lease for a space within a building. In a net lease, the tenant not only pays rent, but also part of the building's operating costs. These costs include property taxes, insurance and maintenance.