While finding the perfect space for your business is one of the most exciting and impactful times for your business, it is also one of your biggest expenses and comes with many potential pitfalls. While this may seem relatively simple, there are a large variety of different lease formats, and all of these formats have some serious pros and cons for the business owner. It’s important to know which type you are signing because it will impact your ongoing costs significantly.

Net leases are commonly used with all commercial properties and tend to favor the landlord, primarily because they place the bulk of the variable cost responsibilities in the hands of the tenant. Gross leases can be much more tenant-friendly because there is significantly less variance in the amount of your payments. Percentage leases are frequently used in retail properties and can be beneficial of both the landlord and the tenant.

Each lease type is unique and could have potential hidden costs, such as limited control over fluctuating expenses or rent increases. Our recommendation is to fully understand the type of lease you sign for your space in order to avoid unexpected costs. Additionally, we recommend having a professional tenant rep on your side of the table who knows the ins and outs of all of these lease types as well as the real estate market.

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If you would like to speak to a tenant rep about understanding your lease, please reach out to a Rokos Advisors broker. We are here for you and happy to help.