When you are drafting or signing a commercial lease, it may have something called a “net.” It’s important to understand what this means because it’s going to define the obligations set out by the lease.
In general, you could have a standard commercial lease, a single-net lease, a double-net lease or a triple-net lease. Each number simply adds more obligations to the person who is leasing the space, removing them from the property owner.
How the progression works
For example, the most basic commercial lease could simply say that the tenant has to pay rent every month and they get to use the space. They are not liable for any other costs.
However, if the landlord uses a single-net lease, then property taxes have to be paid along with that monthly rent. If the landlord uses a double-net lease, then the tenant has to pay property insurance and property taxes. If they use a triple-net lease, they pay all of that and they also add in real estate taxes, building insurance and the costs of maintenance. The tenant may also be obligated to pay for utilities, such as electricity or water.
A misunderstanding over this contract can have a very detrimental impact on the relationship between the two parties. An agreement that someone thinks makes sense as a traditional lease may be too expensive if they find out that it’s actually a triple-net lease and it has many other costs that go along with it, for example.
As such, it’s quite important for both sides to understand all the legal options they have, the steps they need to take and the obligations that are created when signing any type of real estate contract.