The Most Common Types of Commercial Lease Agreements in Maryland

Commercial lease agreements are contracts that are used by commercial property owners to collect monthly payments from tenants renting their property. This agreement defines how much will be paid for rent, frequency of payments, any other costs, legal responsibilities, and regulations required when renting out the commercial property. Once the agreement is signed by both parties, the document is binded legally. Here are the three most common types of commercial lease agreements in Maryland.

Gross Lease

With a gross lease, the tenant’s monthly rent covers all of the property’s operating expenses.  These expenses can include anything from maintenance fees and utilities to property taxes.  A gross lease is most common for warehouse and industrial spaces.

The benefit to a gross lease is that the tenant’s rent is fixed even if expenses fluctuate. For example, energy bills typically increase in the summer and winter due to higher heat/AC usage. Regardless of this increase, the tenant still pays the same price every month. Some landlords will incorporate variables in the lease to allow for some flexibility in monthly costs, such as if the property insurance increases and other uncontrollable costs.

Modified Gross Lease

Also known as a modified net lease, a  modified gross lease provides a middle ground for tenants and landlords. Rather than all expenses being included in one fixed monthly rate, operating expenses are separate from the rent and fluctuate. For example, the tenant may pay a set monthly rate each month for rent, but also be responsible for paying their own gas & electric bill, which will vary based on the amount used.

Lease Types

The following are generally types of net leases which all can be modified through negotiation.

• Net Lease: The tenant is responsible for paying fixed operating expenses such as insurance, common area maintenance, snow removal, public utilities, and property taxes for example.  Because tenants cover those costs, the base rent on a net lease is typically lower.
• Modified Gross Lease: The landlord pays the building expenses. The tenant pays a portion of the utilities or other items such as landscaping and snow removal.
• Gross Lease: The tenant pays a monthly rent with everything included.
• Triple Net Lease: The tenant covers all costs of the property, enabling them to have full control of the building.

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For more information, visit our website www.needspacecommercial.com. To contact us, give us a call at (410)-551-3278!