If you are looking for commercial space in Ottawa, you’ll hear terms like net lease, gross lease, triple net lease, net-net-net lease, double net lease etc. Understanding the difference between these types of leases is important because they dictate how you’re charged rent.
Gross Leases
The most basic type of lease is a Gross Lease – also known as a Full-Service Lease. If you have a Gross Lease, you pay a fixed amount every month as rent, and the landlord is responsible for all the costs to operate the building. In Ottawa, Gross Leases are typically found with smaller landlords and shorter-term leases.
Net Leases
The vast majority of Ottawa landlords use some version of a Net Lease. A Net Lease will usually require that you pay Net Rent (also know as Base Rent or Minimum Rent) and other costs related to the operation of the building. These expenses are either paid directly by you or charged to you by the landlord.
Technically speaking, there four different types of Net Leases – there’re ‘Single Net’, ‘Double Net’, ‘Triple Net’ and ‘Absolute Net’ Leases.
Single Net Lease – you pay your Net Rent and one other major expense – usually, it’s the property taxes.
Double Net Lease (sometimes called a Net-Net Lease) – requires that you pay two major expenses – usually the property taxes and insurance for the building.
Triple Net Lease (also know as Net-Net-Net Lease or Fully Net Lease) – you pay the Net Rent and all the other expenses related to running the building, including property taxes, insurance, maintenance and repair, janitorial, snow removal, garbage removal, and utilities. These expenses are either paid directly by you or paid by the landlord and charged back to you.
Absolute Net Lease – like a Triple Net Lease, you pay the Net Rent and all the other expenses related to running the building as well as costs associated with major structural repairs and building system replacements.
Due Diligence Required
The challenge with all this jargon is that none of it is standard, terms can be used interchangeably, and you will encounter hybrids of the varying types of Net Leases. So, if you are told that a landlord uses a Net Lease, you have to make sure that you clearly understand how the rent is charged, what’s included in the rent and, more importantly, what’s not!
Do you have a question about your Lease? Send me an email at jeff.daniels@royallepagecommercial.com