Nadel & Ciarlo, P.C.

What's a net lease for New York commercial property?

In New York City, lessors of commercial property typically expect some negotiation when they present a proposed lease to a prospective lessee. Obviously, the amount of monthly rent is one of the most critical terms. But base rent alone is not the only figure the potential tenant must consider. Commercial leases vary greatly in terms of which party is responsible for other costs including utilities, property taxes, maintenance and insurance. There are four basic types of commercial lease that handle these costs in different ways.

In a gross lease, the tenant pays a fixed amount per month and the landlord is responsible for property taxes, maintenance and insurance. In a gross lease the tenant may or may not be responsible for utilities. Although the overall rent is generally higher in a gross lease, the tenant will have the certainty of knowing the total rent will be the same each month.

The other main option is a net lease, in which the tenant is responsible for some or all of the costs associated with the building. In a single net lease the tenant is responsible for property taxes in addition to rent. In a double net lease the tenant pays rent plus insurance and property taxes, and in a triple net lease the tenant pays rent plus insurance, property taxes and maintenance.

For those seeking to rent retail or office space in New York City, negotiating favorable lease terms can help increase future profit margins. Having the assistance of an experienced real estate lawyer, who understands not only the law but what terms can ordinarily be negotiated, can be a huge advantage for the prospective lessee.

Source: Investopedia, "Gross Lease," accessed on March 15, 2015

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