Question

Discuss three different types of business leases and the merit of each one.

Answer 1

1) Single Rent Leases: In single rental lease, the tenant pays base rent along with property tax computed on a a pro-rata share of the building's and the landlord pays for all other building expenses. The tenant also pays janitorial services and utilities.

Merit:

-- Less risk is shifted to the tenant. The tenants pay only the property taxes while maintenance costs and insurance premiums are paid by landlord

Demerit:

Although tenant pays for the taxes in a single net lease, however landlords prefer that the payment passes through them as they want to ensure that the taxes are paid timely and accurately

2) Triple Rent Leases: In triple rental lease, the tenant pays for almost everything such as rent, insurances, property taxes, and common area maintenance and repairing expenses

Merit:

-- Base rent is usually lower

-- The expenses are transparent for the tenant

-- The savings in cost of the operating expenses are passed on to the tenant instead of the landlord

Demerit:

-- High responsibility level for all the building elements with substantial added cost responsibilities

-- It tend to be more landlord-friendly

　

3) Gross Rent Leases: In gross rent lease the tenant pays a flat rental fee, and the landlord is solely responsible for all other costs with ownership such as insurance, taxes, utilities and maintenance. The lease is "all-inclusive"; can also be modified to meet the requirements of the tenants

Merit:

-- The lease is very tenant-friendly

-- Tenants has no responsibility for costs of maintenance

-- Simpler for tenant to budget for lease costs.

Demerit:

-- the rate of rent are generally than the base rent of a triple net or modified triple net lease with a motive to offset the costs that are incurred by the landlord.