Commercial Leasing Key Terms

Know commercial leasing terms like fixed payments and triple net lease

Commercial leasing may be a good investment for a business. Whether the business is leasing its own property to tenants or becomes the tenant, there are various leasing terms that are important to know. These terms include real estate and equipment leasing terminology commonly found in the policies and contracts. Some terms include fixed payments, collateral based working capital and triple net lease. Businesses should invest the time in learning these terms before writing or signing a contract for a commercial lease.

Use clause

The use clause of a commercial lease is added to the lease by the landlord. It states how the property under the lease may be used. It is essential that the business follow these use terms since violating them could void the lease.

Fixed payments

In a commercial lease, fixed payments are payments that remain the same throughout the entire period of the lease. Fixed payments may change under a new contract or lease extension.

Operating equipment

A commercial equipment lease may cover operating equipment. These are the types of equipment used to keep the business running.
U.S. Small Business Administration gives examples of operating equipment and details the differences between buying and leasing..

Collateral based working capital

Sometimes a business will own valuable property and wish to borrow against its value. This is called collateral based working capital. A lease is placed on the property, providing the business with funds needed to operate the business.

Triple net lease

In a triple net lease, the tenant is responsible for part of the expenses of the property, in particular the property insurance, property taxes and common operating expenses. Additionally, the tenant is responsible for its operating expenses, such as utility costs.

Gross lease

A gross lease is a type of commercial leasing arrangement for real estate. In this type of lease, the tenant will pay a fixed term rent to the property landlord for using the space. The landlord agrees to pay for some of the operating costs. Sometimes, the gross lease stipulates the landlord will pay all operating expenses on the property.

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