“There is no such thing as a ‘Net’ Lease”. If someone tells you they have a “net” lease for sale, call bull….., and check your back pocket. I like to think of terms like this as “slang”.
Real estate is a wonderful world where everyone is very sure of their definitions and nomenclature, and it is only decided when the attorneys join in. Countless Developers/owners/occupiers and Associations have piled on to “define” what the term Net, or Net Net, or Net Net Net, means but:
A Lease is a negotiable document that defines Occupancy by a Tenant. The costs of occupancy are described within the lease, and it is up to you and your broker to determine the potential costs and wether it fits your budget.
I could sit here and tell you that a “Full Service Lease”- Gross, is the best for tenants because it limits the costs of occupying and the Landlord has the responsibility of maintaining the property.
I could tell you that a “Net” Lease best for the Landlord because the cost of maintains the property is the burden of the occupier.
I could tell you that a “Modified Gross” splits the difference with taxes, insurance, Common Area Maintenance, Structural etc are assigned to the Landlord or the Occupier given specific circumstances ie, is it a multi-tenanted building etc.
I could tell you what NAIOP says about net leases– I could tell you what the second “Net” according to BOMA is
I could tell you what the third “Net” according to ICSC is
– well you get the idea. )
Bottom line: you have to read the lease and or proposal diligently and ask a lot of questions. This is why you hire professionals. Entering into lease negotiations with a landlord without proper representation on your side is something that is very shortsighted even if you are the most experienced in the business in the negotiations – you need several sets of eyes on real estate documents to make sure you understand everything and don’t miss something that could affect your occupancy in a negative manner over your term. Hire a good Broker.
Wikipedia definition of net lease.
