Tenants and landlords should be aware of the different types of leases available
Upon moving into a flat in India, tenants must sign a lease agreement with their landlord. Although leave and licence agreements are widespread in the residential real estate sector, tenants renting commercial premises must sign a lease. In terms of the real estate industry, such leases could be of many forms.
Leases of various types
Based on their form, leases can be categorized as follows in the real estate industry: absolute net lease, triple net lease, modified gross lease, and full-service lease.
- Types of leases: Triple net lease
A triple net lease, which is typical in the commercial rental industry, requires a tenant to pay the property’s principal costs (like property tax, insurance, and maintenance) in addition to paying rent and utility expenses. The triple net lease often referred to as the NNN lease, provides landlords with a stable and accurate income source. (A tenant must pay property tax in a single net lease; in a double net lease, he must pay property tax and insurance; and in a triple net lease, he must pay property tax, insurance, and maintenance.)
The triple net lease, which is often used for standalone commercial buildings, is normally for a single tenant.
- Types of leases: Absolute net lease
Tenants are liable for paying upkeep, security, and municipal taxes, as well as the structure of the building, under an unconditional net lease. An absolute net lease also referred to as a bondable lease, relieves a landlord of all financial responsibilities. In this instance, the renter receives benefits in terms of a decreased monthly rental. When a landlord builds a custom-made commercial rental space for a single-tenant, an absolute net lease is created, considering all of his tenant’s needs. Typically, huge corporations opt into such lease agreements.
- Types of leases: Modified gross lease
In a modified gross lease, the landlord is responsible for insurance, property taxes, and upkeep, whereas the tenant is responsible for paying living expenses. The owner is responsible for the roof and other structural components of a structure. When opposed to an absolute net lease or NNN lease, the monthly rental is higher in this instance. In-office space leasing, in which the number of tenants is significant, modified gross leases are prevalent.
- Types of leases: Full-service lease
A full-service lease also referred to as a gross lease, is a leasing arrangement that mandates a landlord to pay all running costs, such as property tax, maintenance, security, and housekeeping fees. Tenants may, nevertheless, be required to pay specific utility expenses, such as phone and internet bills. Full-service leases, which are common in big multi-tenant commercial units, compel a tenant to pay hefty rents.
Disclaimer: The views expressed above are for informational purposes only based on industry reports and related news stories. PropertyPistol does not guarantee the accuracy, completeness, or reliability of the information and shall not be held responsible for any action taken based on the published information.
