The Most Common Types of Commercial Lease Agreements in Maryland
Commercial lease agreements are contracts that are used by commercial property owners to collect monthly payments from tenants renting their property. This agreement defines how much will be paid for rent, frequency of payments, and any other costs and regulations required when renting out the commercial property. Once the agreement is signed by both parties, the document is binded legally. Here are the three most common types of commercial lease agreements in Maryland.
Gross Lease
With a gross lease, the tenant’s monthly rent covers all of the property’s operating expenses. These expenses can include anything from maintenance fees and utilities to property taxes. Because all costs are included in the monthly rent, the base rent under a gross lease is higher than most. Though rent is higher, it’s the only monthly expense the tenant has to pay. A gross lease is common for retail, office, and industrial spaces.
The benefit to a gross lease is that the tenant’s rent is fixed even if expenses fluctuate. For example, energy bills typically increase in the summer and winter due to higher heat/AC usage. Regardless of this increase, the tenant still pays the same price every month. Some landlords will incorporate variables in the lease to allow for some flexibility in monthly costs, such as if the property insurance increases.
Modified Gross Lease
Also known as a modified net lease, a modified gross lease provides a middle ground for tenants and landlords. Rather than all expenses being included in one fixed monthly rates, operating expenses are separate from the rent and fluctuate. For example, the tenant may pay a set monthly rate each month for rent, but also be responsible for paying their own gas & electric bill, which will vary based on the amount of used.
Net Lease
A net lease is the most flexible commercial lease option in Maryland. The tenant is responsible for paying fixed operating expenses such as insurance, common area maintenance, and property taxes. Because tenants cover those costs, the base rent on a net lease is typically lower. The four types of net leases are:
- Single Net Lease: The landlord pays the building expenses; The tenant pays a portion of the property tax, monthly rent, and utilities.
- Double Net Lease: The landlord pays for common area maintenance; The tenant pays portion of property tax and insurance, monthly rent, and utilities.
- Triple Net Lease: The tenant pays portion of property tax, insurance, common area maintenance, and monthly rent.
- Absolute Triple Net Lease: The tenant covers all costs of the property, enabling them to have full control of the building.
Want to find an ideal location for your growing Maryland company?
At Newspace Commercial, we fully represent the tenant looking to find the perfect commercial space. Born from AJ Properties, an Anne Arundel County based commercial real estate firm, Newspace Commercial is designed to focus solely on Tenant Representation services, ensuring that you find your perfect business space, avoid mistakes, and negotiate the best deal.
For more information, visit our website www.newspacecommercial.com. To contact us, give us a call at (410)-218-1372!
