Go from open space’ to open for business with these leasing essentials…

Landlords should be clear about the types of leases they offer, as net leases can be beneficial by passing certain costs to tenants, while gross leases provide more predictable costs.

For tenants, understanding lease terms, renewal options, and rights regarding modifications is vital.

In Florida, the absence of a state sales tax on most commercial leases and the elimination of business tax on rent offer significant savings, making it an attractive option for businesses.

Engaging with a qualified agent can provide valuable insights into market trends and assist in negotiations, ensuring both parties’ interests are protected.

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Commercial real estate leases are primarily categorized by how expenses are allocated between landlord and tenant. Here are the main types:

GROSS (FULL-SERVICE) LEASE
The tenant pays a single rent amount, and the landlord covers all property expenses including taxes, insurance, maintenance, utilities, and management costs. This provides predictable costs for tenants but typically results in higher base rent.

NET LEASES
These shift various property expenses to the tenant in addition to base rent:
Single Net Lease (N) – Tenant pays base rent plus property taxes. The landlord handles insurance, maintenance, and other operating expenses.
Double Net Lease (NN) – Tenant pays base rent plus property taxes and insurance premiums. Landlord remains responsible for maintenance and repairs.
Triple Net Lease (NNN) – Tenant pays base rent plus all three major expense categories: property taxes, insurance, and common area maintenance (CAM). This is most common in retail and industrial properties.
Absolute Net Lease (Absolute NNN) – Tenant assumes responsibility for all property expenses including structural repairs, roof replacement, and major building systems. Landlord receives rent with minimal obligations.

MODIFIED GROSS LEASE
A hybrid approach where landlord and tenant negotiate which expenses each party will handle. For example, tenant might pay utilities and janitorial while landlord covers taxes and insurance. Terms vary significantly between agreements.

PERCENTAGE LEASE
Common in retail, the tenant pays base rent plus a percentage of gross sales revenue once sales exceed a predetermined threshold (natural breakpoint). This aligns landlord income with tenant business performance.

GROUND LEASE
The landlord leases only the land while the tenant constructs and owns the building improvements. These are typically long-term leases (25-99 years) where the building eventually reverts to the landowner.

Each lease type serves different property types and tenant needs, with net leases becoming increasingly common as they provide landlords with predictable income while giving tenants more control over property operations.

Essential elements include party identification, property description, lease term, rent provisions, mutual agreement language, signatures, and witnesses.

In a gross lease, tenants pay a fixed rent while landlords cover all operating expenses (taxes, insurance, maintenance).

Net leases shift these costs to tenants – single net (taxes only), double net (taxes and insurance), or triple net (taxes, insurance, and maintenance).

Percentage leases combine base rent with a percentage of gross sales once revenue exceeds a predetermined threshold. This structure aligns landlord income with tenant business performance.

Effective October 1, 2025, Florida repealed the state sales tax on commercial real estate leases.

So what?
• Significantly reduced occupancy costs for commercial tenants.
• Makes Florida more competitive for business relocation and expansion.

Who is responsible? This depends on the lease structure. In gross leases, landlords handle maintenance. In net leases, tenants assume increasing responsibility – from basic maintenance in single net leases to complete property upkeep in absolute net leases. Clear lease language is crucial to avoid disputes.

Ground leases involve leasing land only while tenants construct improvements. These long-term agreements (typically 25-99 years) eventually return all improvements to the landowner. They’re common for major developments where tenants want control over construction and operation.

A build-to-suit arrangement is where landlords construct a facility in accordance with tenant specifications before lease commencement.

The lease typically includes detailed construction specifications, completion timelines, and often longer terms to justify the landlord’s development investment.