19 August 2019/ rent_commercial_property_guide

What are the most common types of commercial leases in the UK

If you’re looking to move office, the commercial lease jargon can feel overwhelming and confusing. For example, what on earth is the difference between a percentage lease and a triple net lease?

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However, it’s important that you have a good understanding of the different types of lease so you know exactly what you’re signing up for. Below, we’ve outlined some common types of commercial leases in the UK and what they mean for you.

Percentage Lease

This is a type of lease that mainly applies to retail businesses such as those renting in shopping centres. The tenant will pay a fixed rate of rent, plus a percentage of their gross income (base rate plus % of gross profits).

Percentage leases can be beneficial for retail companies, because they only have to pay an increased amount of rent when they can afford to do so.

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Gross Lease

With a gross commercial lease, the tenant will pay rent to the landlord as a gross amount on a monthly basis. In this case, the landlord is responsible for all additional expenses to the property - payment of property tax, insurance and maintenance. If you were to name it in a more casual way, you might think of it as ‘all bills included’.

You might also get a ‘Modified Gross Lease’, where the terms have been adjusted to suit the needs of the property owner and tenant. The landlord is still responsible for property tax, insurance and some maintenance, but the tenant may pay a separate or additional fee for utilities and some maintenance works.

Gross leases are often popular because they are easier to manage and predict, but they might end up being more expensive overall as the landlord could overestimate the costs needed to pay for expenses.

Single Net Lease

Net leases are different to gross leases because the tenant will become responsible for some of the property costs.

With a single net lease, the tenant becomes in charge of paying their portion of the property taxes, but the landlord must still pay for any other building costs, including maintenance, utilities and insurance.

Double Net Lease

In a double net lease, there is slightly more responsibility on the tenant. They will have to pay their share of the property tax plus their share of the insurance premiums. The landlord is still responsible for any maintenance costs and utilities. All of the payments are made directly to the landlord, as payments separate from the rent.

Triple Net Lease

With a triple net lease agreement, the tenant is held responsible for all property costs, as well as the rent.

They will be required to pay for the following things:

  • Their share of property taxes
  • Their share of building insurance
  • Any maintenance costs
  • Utilities 

Often, the rental cost in a triple net lease will be lower than the rent under one of the other two types because you are not paying for the convenience of having it all sorted in one lump sum.

This is a guide to the most common types of commercial leases but each lease will have its individual requirements laid out in the contract. 

It’s important to read and understand your lease fully before signing, and seek out professional assistance from a property lawyer if you are unsure about anything. 

Most leases are also up for negotiation, so it may well be worth using a specialist agent to organise your property search and move.

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