The third major type of commercial lease-sale is the modified gross lease (or modified net leasing) and offers tenants and landlords a happy middle ground. The modified crude allows for a wider range of trading in operating costs. The basic rent is then subject to the terms agreed by both parties, such as gross leasing. The differentiating factor is that the leasing rate remains fixed even in the event of an increase or decrease in costs. The net lease is a highly adjustable commercial lease. The basic rent of a net tenancy agreement is less than a gross tenancy agreement, but the tenant also pays fixed operating costs such as property taxes, insurance and DE CAM (Common Area Maintenance) items. There are four types of net tenancy: in a single net lease, tenants pay a fixed rent and part of the property tax (which would be negotiated with the lessor). The landlord then pays for the construction costs, while the tenant pays directly for services and other services. Commercial real estate leasing can seem scary, especially since they are a long-term commitment that can cost a lot of money.
A gross lease, also called full-service-leasing, is the simplest type, and it means exactly what it sounds: the landlord requires a gross package each month from the tenant. The owner is responsible for paying property tax bills and building services, including insurance, maintenance and common site costs. With a single net lease, the owner collects funds that are used to pay property taxes and then they can pay taxes directly to the city. Costs generally include insurance, utilities, management and public and local taxes. Consider the gross full service leasing similar to an all-inclusive resort – pay for a package and the rest of the amenities are included. A good landlord-tenant-match in commercial real estate requires a rental contract that benefits both parties. Landlords need rent income and they need to control costs to ensure a profit. Tenants want to link their rental costs as closely as possible to their own profits and losses. Individual rental is one of the least common rental structures in commercial real estate.