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Understanding the three main types of commercial real estate leases

Starting a new business in Michigan involves making lots of big decisions. One of these decisions involves deciding where they want to lease commercial space. Before you lease commercial property, it’s good to know how the main types of commercial leases differ from one another.

Net leases

Many people who lease commercial space prefer net leases. These agreements typically have tenants paying for rent, utilities and a predetermined share of this space’s operating costs. The exact cost or percentage of what you’ll pay should be in a leasing agreement. Make sure the percentage is fair before signing a net lease. You don’t want to sign this type of lease and find out you’re going to get ripped off.

Full-service leases

If you want an easy way to lease business space, you might consider a full-service lease. This lease type typically means you receive one bill to pay at the end of a month. Under this arrangement, your landlord is in charge of paying for expenses related to building upkeep and general maintenance.

Percentage leases

While not as common as full-service or net leases, a percentage lease can be a decent way to rent commercial property. This arrangement requires that tenants, in addition to paying rent, pay their landlord a certain percentage of their respective company’s income generated from sales. Considering how complex these arrangements are, not following through on its terms could lead to a situation involving commercial real estate law litigation.

As you can see, there are good and bad aspects to every type of commercial lease. Considering the length and cost of leasing commercial space, take time to make sure you found the right property before signing your lease contract.