Leasing out commercial property often involves a long-term commitment, a significant investment, and making decisions that will impact the success of your business.
As a commercial landlord or a tenant seeking commercial space, navigating the complexities of commercial leases requires meticulous attention to detail. Working with an experienced attorney will help you safeguard your interests and ensure the lease terms are structured to your benefit.
Understanding Commercial Lease Types
When entering a commercial lease in Milwaukee or elsewhere in the State of Wisconsin, it’s crucial to understand the two primary lease types: triple-net leases (NNN) and gross leases. Each comes with distinct financial responsibilities. Because commercial leases often last five years or more, it is crucial that the agreement precisely reflects the intentions of both the landlord and the tenant.
What Is a Triple-Net Lease (NNN)?
In a triple-net lease (NNN), tenants not only pay base rent, but also cover a share of the property’s operating expenses (often called “additional rent”), including:
- Property taxes
- Insurance
- Maintenance and repairs
- Common-area upkeep
For example, if a tenant leases half of a building, the that would likely be responsible for 50% of the property’s operating expenses. While the base rent is typically lower, a prospective tenant should ask the landlord about historical operating costs to get an idea of how much “additional rent” the prospective tenant should expect to pay. Additionally, tenants often need to customize the space to meet their needs, so a “buildout” or renovation budget should be considered. Landlords may sometimes contribute to these buildout costs to attract tenants.
What Is a Gross Lease?
A gross lease offers a simpler payment structure. Tenants pay a fixed rent, and landlords cover most operating expenses like property taxes, building insurance, and building maintenance. The tenant typically pays for its own utilities, such as electricity, and for insurance to cover the leased space and the tenant’s property, including its inventory.
Unlike a triple-net lease, tenants in a gross lease typically do not pay for:
- Building insurance
- Property taxes
- Common area maintenance
This structure provides predictable monthly costs and may be preferred by tenants who are new to leasing commercial space because the lease structure more closely reflects the traditional, residential lease.
Why Hire a Commercial Lease Attorney?
Commercial leases often involve negotiation and multiple drafts to ensure both parties’ interests are met. These contracts are legally binding and often long-term, making it essential to have an attorney review and negotiate the terms to avoid potential disputes.
If you are a landlord looking to protect your rental property, having legal representation ensures the lease is clear, fair, and aligned with your goals.
Similarly, if you are a tenant or prospective tenant and want to protect your rights and ensure you understand the terms of the lease, an attorney can assist you by making sure the lease reflects your intentions before you sign.
Why Choose Heller Law Offices?
With over 15 years of experience, Heller Law Offices excels in commercial lease negotiation and representation in Milwaukee. Attorney Michael Heller sets you up for long-term success by ensuring that your lease is tailored to protect your interests.
Don’t sign a commercial lease without legal guidance.
Contact Attorney Michael Heller for a free consultation today.
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The information contained in the blog is not a substitute for legal advice from a licensed attorney. Each situation is unique, and the information in the blog may not pertain to the reader’s situation. An analysis of the reader’s specific situation is required to provide accurate legal advice.
All information contained in the blog is based upon, or relates to, the laws and administrative code of the State of Wisconsin.