When searching for a commercial rental property, it is important for tenants to understand what their lease requires them to pay and in particular the different types of mechanisms for charging rent that may be employed by landlords in a lease. These include net rent, semi-gross rent, gross rent, and triple net leases.

Seasoned agents, lawyers, landlords and property managers can use terms which to the uninitiated sound the same but can hide expensive distinctions. In particular, we find there can be confusion around the types of rent described in leases being offered with some unknowingly and unintentionally using contradictory terms interchangeably. Tenants should be aware that notwithstanding the type of rent charged, additional payments such as outgoings, contributions to promotions funds, cleaning charges etc may also apply.

Understanding the distinctions between these terms is crucial for tenants, as it can significantly impact the overall cost of renting a property.

Net rent refers to a lease in which the tenant is responsible for paying only the base rent, without any additional costs such as property taxes or insurance. This is the most basic type of lease and is often the most desirable for tenants, as it allows them to budget for a fixed monthly rent payment. However, it is important for tenants to understand that if any additional costs are incurred, such as repairs or maintenance, they will be responsible for covering those costs.

Semi-gross rent includes the base rent as well as some additional costs, such as property taxes, but not all costs such as insurance. This type of lease can be more beneficial for tenants who want to budget for a fixed monthly rent payment while also having some protection against unexpected costs. However, tenants will still be responsible for covering some additional costs, such as insurance.

Gross rent includes the base rent and all additional costs such as property taxes, insurance, and common area maintenance. This type of lease can be more beneficial for tenants who want to budget for a fixed monthly rent payment while also having protection against unexpected costs. However, tenants will also be responsible for covering some additional costs, such as insurance.

Triple net leases refer to a lease agreement in which the tenant is responsible for paying all additional costs such as property taxes, insurance, and common area maintenance in addition to the base rent. This type of lease is often the most expensive for tenants, as they are responsible for covering all additional costs. However, it can also be more beneficial for tenants who want complete control over the property and have the financial means to cover these additional costs.

In conclusion, it is important for tenants to understand the distinctions between these leases as it can significantly impact the overall cost of renting a property. Each type of lease has its own benefits and drawbacks, and it is important for tenants to carefully consider their options before making a decision and to be clear as to what exactly you will be required to pay for. It’s always best to consult with a real estate agent or lawyer to help you understand the lease (and the extent of your commercial exposure) before signing it.

Should you have any questions regarding the type of lease you are entering into, please do not hesitate to contact the team at Arena Law who will gladly assist you in deciphering your obligations.