What type of lease is commonly used in commercial real estate?

In commercial real estate, a net lease is a prevalent type of lease structure where the tenant agrees to pay not only the base rent but also additional expenses associated with the property. These expenses often include property taxes, insurance, and maintenance costs. The specific requirements can vary, but generally, this arrangement allows landlords to have a more predictable income stream since tenants are responsible for covering these additional expenses.

Net leases come in several varieties, such as single net, double net, and triple net leases, each defining different responsibilities for the tenant regarding property expenses. Due to the nature of commercial properties, where operating costs can significantly impact profitability, net leases are frequently favored by landlords because they reduce the financial burden of these expenses while providing clearer budgeting for tenants.

While month-to-month leases may offer flexibility, they are less common in commercial contexts. Similarly, subleases are more about leasing a property from a tenant rather than the landlord, and while long-term leases are certainly utilized, they typically involve more fixed terms that do not necessarily incorporate the nuanced expense sharing seen in net leases. This combination of factors makes net leases a favored arrangement in commercial real estate transactions.