Understanding the Different Types of Retail Leases: A Guide for Business Owners

When it comes to commercial real estate, different types of retail leases are used to outline the terms and conditions of renting retail space. Here are some common types of retail leases:

1. Gross Lease

In a gross lease, the tenant pays a fixed amount of rent, and the landlord is responsible for covering all operating expenses, such as property taxes, insurance, utilities, and maintenance.

2. Net Lease

Net leases come in various forms, including single net lease (N lease), double net lease (NN lease), and triple net lease (NNN lease). In a net lease, the tenant pays a base rent plus a share of some or all operating expenses, such as property taxes, insurance, utilities, and maintenance.

3. Percentage Lease

A percentage lease is commonly used in retail settings. In this type of lease, the tenant pays a base rent plus a percentage of their gross sales as additional rent. The percentage rent is typically calculated as a percentage of sales above a specified threshold.

4. Ground Lease

A ground lease involves leasing the land on which a retail property is built, but the tenant is responsible for constructing the building and assumes ownership of the improvements during the lease term. This type of lease is often long-term and can be used for large-scale retail developments.

5. Short-Term Lease

Short-term leases are typically for a shorter duration, such as a few months or a year. They are often used for pop-up shops, seasonal businesses, or temporary retail setups.

6. Build-to-Suit Lease

A build-to-suit lease involves the landlord constructing a retail space according to the tenant’s specific requirements. The tenant may have input into the design and layout of the space, and the lease is often long-term.

7. Specialty Leases

Some retail properties offer specialty leases, such as kiosk leases, cart leases, or common area leases. These types of leases are typically shorter-term and may involve a smaller footprint within a larger retail space.

It’s important to note that lease terms and conditions can vary, and the specific details and provisions may differ based on the agreement between the landlord and tenant. It’s advisable to consult with a legal professional experienced in commercial real estate to understand the specific terms and implications of a retail lease.