Leasing of property is common activity in the state of California. But there are significant differences in leasing commercial and residential real estate. The rights are responsibilities vary significantly. Basic understanding of the two types of leases will help you sign the right variant at the time of letting out your property.
It is meant for business usage. The lease concerns the use of the space to produce or sell the products or the services. A commercial lease will outline the specific business operations that may be conducted on the premise. Forms. Legal offers free California commercial lease agreement for the subscribers.
It is also known as a full-service lease. In this, the rent paid by tenant covers all the expenses of the property. These include property taxes, utilities, maintenance, etc. The landlord pays these expenses with the rent given by the tenant to offset the costs. It results in high base-rent, but the tenant doesn’t have to pay anything else.
Most tenants prefer it because they don’t have to worry about paying for the operations of the building. It’s mostly used for industrial, retail and office properties. A landlord may try to cover the variable costs by including a clause in the lease agreement to offset any temporary rise in the electricity costs or some other costs.
It is an adjusted form of the commercial real estate lease. The base rent is lower than the gross lease, but the tenant is responsible for paying property taxes, insurance and the maintenance cost for common area. Some variants are:
Single Net Lease. The tenant pays for the base rent and part of property tax, utilities, and other services. Landlord pays the building expenses.
Double Net Lease. It includes the payments as per single net lease and also the property insurance along with the property tax. The landlord pays for the maintenance area, but the tenant is responsible for utilities and garbage services.
Triple Net Lease. Besides the base rent, the landlord is also responsible for the payment of property taxes, insurance and common area maintenance in full or part.
Modified Gross Lease
It is yet another types or leasing arrangement that offer room for negotiations. It allows for a wide range of negotiations when it comes to the operating expenses. The base rent is fixed after negotiations, but the difference lies in the fact that the lease rate remains fixed even if the costs increase or decrease.
The lease is meant to provide an individual or family with property for a living. Commercial leasing is not meant for such purposes. Even if a commercial location has a kitchen and a place to sleep, it’s not the primary use of the property leased for commercial use. A commercial lease may prohibit the use of the property for such residential usage.
Residential tenants have may important legal protections. These don’t apply to the commercial tenants. It’s because both the parties in a commercial lease contract entering the deals are on equal footing. The person entering the residential lease doesn’t have the required legal know-how to protect his interests.
Residential contracts, in most cases, are for one year. However, the commercial contracts, on the other hand, are for a longer duration, usually for 3 to 5 years.
Maintenance of Property
Residential tenants are hardly responsible for maintenance and repairs to the premises. If something needs to be replaced, the tenant has to inform the landlord. In a commercial lease, the landlord manages the building or the walls, while the tenant manages the rest.
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