Leases & Commercial Leasing Terminology

Question 1

Gross Lease

• Rent is gross income to landlord*
• Landlord pays expenses*

Net Lease

• aka Triple Net Lease (Net, Net, Net)*
• Tenant pays all expenses*
• Landlord pays mortgage payments*

Percentage Lease

• Base rent*
• Plus percentage of tenant’s gross income*
• Common in shopping centers (retail businesses)*

Ground Lease

• Lease for land only - usually net lease*
• Tenant builds improvements*

Sale-Leaseback

• Seller becomes tenant*
• Seller benefits: working capital, rent is tax deduction, no property mgmnt*
• Seller disadvantages: No cost recover, no future appreciation*

Graduated Lease aka Graded Lease

• Specific increases or decreases in rent*
• **Escalator clause*

Index Lease

Rent tied to index * consumer price index *Inflation rate

Lease Option

Lease w/ option to buy or re-lease

Anchor Lease

Lease with a major tenant

Proprietary Lease

Lease in Cooperative Building

Section 8 Lease

Rent subsidized by fed gov’t