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Leases

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.

Net leases

 

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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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