Over the next few weeks, we will be adding to our series of helpful tips for businesses starting to look into leasing. This post is the first of 10 on the essential questions you should ask before signing an office lease.
Is it a GROSS or NET lease?
For businesses or doctors that are just starting to look into leasing office space, the terms gross and NET lease may seem foreign. However, there are significant differences between a gross and NET lease– let’s break down the basics.
With a GROSS lease the following items are included in the rent price:
- Basic rent
- Property taxes
- Heating & air conditioning maintenance
- Cleaning service for all common areas
- Use of any building amenities
- Pest control
- Landscaping & snow removal
- Parking lot maintenance
- Janitorial service for your suite
With a NET lease, the tenant is responsible for paying all of the items listed above separately based upon a proportionate share of the building.
The payment share is based on the previous year’s building expenses and is calculated by the landlord. The tenant will pay an initial amount to cover what was spent in the previous year and at the end of the year the tenant will get a charge back for the difference along with documentation to show where all the capital was spent.
Now I know what you’re thinking…”Why in the world would I want a NET lease?”
The simple truth is that neither lease type is better than the other. Both lease types benefit businesses in different ways.
The largest caveat to look out for in a NET lease is an increasing building expense cost. At DynaCom, we try to help our tenants as best as we can by capping the excess cost. By creating a cap, tenants can rest easier in a NET lease knowing they will have a consistent or lower building expense cost. If you are leasing NET try to get your leasing agent to ensure there is a cap to the cost.