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Negotiating acceptable leases
Commercial property owners should avoid month-to-month leases
unless there is a reason to keep the property available. Generally,
rental agreements for residential or commercial property should
be for at least one year. If inflation is on the rise, landlords
are generally unwilling to offer multi-year leases at fixed rates
or with fixed increases. They would prefer short (one year) leases
or multi-year leases tied to an inflationary index.
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Net leases
A triple net leases, usually called a net lease, is one in which
the tenant pays all maintenance and repair costs in addition to
taxes and insurance. The property owner is guaranteed a certain
net each month.
Percentage leasing
The owner of a great retail location can do more than just collect
a set rent. A percentage lease gives the owner an agreed upon percentage
of the retailer’s gross income. To protect the owner, a percentage
leases should also require a minimum rent, allowing for inflationary
increases, and a covenant to remain in business. Some percentage
leases include graduated percentages that decrease if the gross
increases above a particular amount. Percentage leases may also
contain recapture clauses that give the owner the right to terminate
a lease if the tenant fails to make a certain gross.
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