Types of Common Commercial Leases

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September 14, 2018
Author: Erik Piazza
Organization: PHELPS DUNBAR LLP

TYPES OF COMMON COMMERCIAL LEASES
Triple Net Lease
-Triple net leases are typically used for free standing buildings with a single tenant
-Landlord charges fixed rent. Tenant pays all utilities, repairs, insurance, taxes and other
expenses
-Many triple net leases require the landlord to maintain the capital improvements such as
the structural walls, slab and roof; other triple net leases require the tenant to maintain all
portions of the premises, including the capital improvements
-Tenant typically maintains the common areas

Full Service Lease (Office Lease)
-Full service leases are typically used for office buildings
-Landlord charges fixed rent and tenant pays all utilities, repairs, insurance, taxes and
pass through expenses above a base year of expenses (the fixed rent for the first year of
the lease typically includes the base year expenses)
-Utilities are typically provided during certain hours only and the landlord charges for
any excess hours
-Landlord typically maintains the common areas and provides cleaning services within
the premises
-Tenant typically maintains and insures the interior of the premises and Landlord insures
the common areas and building shell
-Most full service leases require the landlord to maintain (at landlord’s cost) the capital
improvements such as the structural walls, slab and roof; other full service leases require
the landlord to maintain these items but requires that the tenant pay the expenses of such
maintenance and replacement. If the lease allows capital improvement costs to pass
through to the tenant, the costs would typically be amortized over the reasonable useful
life of the improvements.

Shopping Center Lease With CAM.
-Landlord charges fixed rent and tenant pays all utilities (typically separately metered)
and its prorata share of all common area maintenance (CAM), insurance, and taxes
-Tenant’s prorata share should be a fraction based on the square footage of the premises
compared to the square footage of the entire shopping center
-Tenant typically maintains and insures the interior of the premises and Landlord insures
the common areas and building shell
-Some shopping center leases require the landlord to maintain (at landlord’s cost) the
capital improvements such as the structural walls, slab and roof; other shopping center
leases require the landlord to maintain these items but requires that the tenant pay its
prorata share the expenses of such maintenance. If the lease allows capital improvement
costs to pass through to the tenant, the costs would typically be amortized over the
reasonable useful life of the improvements.

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