Leasing Options
A lease gives a tenant a temporary right to possess a property for a stated purpose. The document usually states how long the lease period lasts, how much the tenant must pay for use of the property, when payments are to be made, and how the property will be used, along with an outline of the duties and obligations of all parties who sign it. In a lease document, the landlord is called the lessor and the tenant is called the lessee.
Fixed-Rent Lease
In a fixed-rent lease, also called a gross lease, the tenant pays a fixed amount for the rental and the landlord is responsible for hazard insurance premiums, mortgage payments, repair costs, property taxes, and other costs required to maintain and protect the building. Either the tenant or landlord can be responsible for utilities. A fixed lease is normally used for residential rental agreements.
Net Lease
A net lease is used when the tenant will be responsible for some or all of the costs of maintaining the property, such as taxes and other specific expenses. Net leases are typically used for commercial and industrial buildings and land.
Percentage Lease
A percentage lease bases rent on a percentage of the tenant's gross or net income. This type of lease is most often used for retail stores. It usually states a minimum amount of rent that's due from the tenant, no matter what the tenant's income is.
Graduated Lease
A graduated lease calls for increases in rent at some future date. Graduated leases are most often used for the rental of office space. An index lease bases rent on the rise or fall of an economic index, in much the same way as an adjustable-rate mortgage fluctuates. A reappraisal lease allows rents to change based on changes in the property's value. There are other types of leases drafted to apply to specific circumstances.
