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Understanding a commercial lease

A commercial lease can be very complex in North Carolina or any other state. Start-up entrepreneurs and other business owners usually lease the property where they do business rather than owning it because the cost is lower. As FindLaw explains, unlike most residential leases, commercial leases have negotiable terms since each one is tailored to the needs and desires of the particular landlord and tenant.

Other ways in which a commercial lease is different from a residential lease include the following:

  • Fewer legal protections exist because business people are presumed to have greater knowledge about leases than the typical residential lessee.
  • Lease terms are varied and also negotiable.
  • The lease length normally is for several years, rather than for a single year as is common with residential leases.

Normal negotiable commercial lease terms

Most commercial leases contain a number of negotiable points, such as the following:

  • Rent amount, increases (usually a percentage), and security deposit
  • Lease period
  • Property improvements and who will pay for them
  • Property description, including use restrictions, signage, exclusivity, subletting and/or assigning, and Americans with Disabilities Act compliance

Negotiating a commercial lease

Forbes cautions potential commercial lessees to thoroughly understand the legal document they are signing. In addition, they should know the meaning and consequences of the following types of commercial leases:

  • Single net lease, also called a net lease
  • Net-net lease, also called a double net lease
  • Triple net lease
  • Full service gross lease
  • Modified gross lease, also called a modified net lease

When the lessee business will be one of a number of tenants in a commercial building, the lease usually is a full service or modified gross lease. This means that repairs and operating expenses, such as property taxes and insurance, maintenance of common areas, and cost of utilities, are split between the landlord and the tenant. While a given lessee's rent will not go up if and when operating expenses increase, neither will it go down if and when operating expenses decrease.

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