Entering into a commercial lease is rarely a straightforward process. There are many different factors that are subject to change throughout the leasing process. Understanding the different types of leases is one of the first steps you’ll need to take before entering into any contract.
The list below provides some general information about commercial leases. Other parameters and guidelines with relation to tenant costs versus landlord costs are subject to points outlined in the individual lease.
Triple Net (NNN) Lease
Triple net lease types require the tenant to pay the expenses of the property leases, such as taxes, insurance, maintenance, utilities, and cleaning, in addition to a fixed rental rate. Because the tenant is paying those net expenses, the fixed lease rate is typically lower. This lease type is also known as “net net” or “net net net” and tends to be a longer term lease agreement over many years.
Full Service (FLSV) Lease
A FLSV commercial lease includes the operating expenses and taxes for the building in the stated rent. This is the same as a Gross lease and the opposite of a Net lease.
Full Service Except Janitorial (FLSVEJ or FSEJ) Lease
Like a FLSV, the Full Service Except Janitorial commercial lease type includes the operating expenses and taxes for the building, but it explicitly excludes janitorial in the stated rent. This is the same as a Gross lease and the opposite of a Net lease.
A gross lease is one in which the stated rent includes the operating expenses and taxes for the building. This is the same as a Full-Service lease and the opposite of a Net lease. It is the least common lease type.
Modified Gross (Mod Gross) Lease
A modified gross lease sits somewhere between a Triple Net lease and a Gross lease. Some expenses may be included in the lease, but utilities are most likely paid by the tenant. The terms of the lease vary greatly depending on the circumstances.