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Leasing & Subleasing Terms Guide

Leasing Terms 101

Common leasing terms that you may run into:

  • Gross Lease (Full-Service Lease): In a gross lease, the tenant pays a fixed amount of rent, and the landlord is responsible for covering all operating expenses, including property taxes, insurance, and maintenance costs.

  • Net Lease: This type of lease requires the tenant to pay a portion of or all operating expenses in addition to the base rent. There are different types of net leases:

    • Single Net Lease: Tenant pays base rent plus property taxes.

    • Double Net Lease: Tenant pays base rent plus property taxes and insurance.

    • Triple Net Lease (NNN): Tenant pays base rent plus property taxes, insurance, and maintenance costs.

  • Percentage Lease: In a percentage lease, the tenant pays a base rent plus a percentage of their monthly or annual sales revenue. This type of lease is common in retail spaces.

  • Modified Gross Lease: This lease is a hybrid between a gross lease and a net lease. The tenant pays a base rent plus some of the operating expenses, while the landlord covers the rest.

  • Ground Lease: A ground lease involves leasing land only, typically for a long term, on which the tenant constructs buildings or makes improvements. At the end of the lease term, the land and any improvements usually revert to the landlord unless otherwise stipulated.

  • Short-Term Lease: Short-term leases are typically month-to-month or for a fixed term of less than one year. These leases offer flexibility but may come with higher rent costs.

  • Long-Term Lease: Long-term leases typically span multiple years, providing stability and predictability for both the landlord and the tenant. They often include options for renewal or extension.

  • Retail Lease: Specifically tailored for retail businesses, these leases often include provisions related to operating hours, signage, common area maintenance (CAM) charges, and exclusivity clauses.

  • Office Lease: Designed for office spaces, these leases may include provisions related to utilities, common area maintenance, parking, and access to shared facilities.

  • Industrial Lease: Industrial leases are tailored for warehouses, manufacturing facilities, or distribution centers. They may include provisions for equipment, loading docks, and utilities.

Subleasing Terms 101

Common subleasing terms that you may run into:

  • Partial Sublease: In a partial sublease, the original tenant subleases only a portion of the leased premises to the sublessee. The original tenant retains control over the remaining space.

  • Whole Sublease: A whole sublease occurs when the original tenant subleases the entire leased premises to the sublessee. The original tenant typically vacates the premises entirely.

  • Assignment Sublease: An assignment sublease is a type of sublease where the original tenant transfers all of their rights and obligations under the original lease to the sublessee. In this case, the sublessee effectively becomes the new tenant, taking over the lease entirely from the original tenant.

  • Master Lease Sublease: In a master lease sublease, the original tenant (master lessee) subleases the property to multiple sublessees. The original tenant retains control over the property and is responsible for paying rent to the landlord, while the sublessees pay rent to the original tenant.

  • Direct Sublease: A direct sublease occurs when the original tenant subleases the property directly to the sublessee without the involvement of the landlord. However, the terms of the original lease usually require the landlord's consent for subleasing.

  • Indirect Sublease: An indirect sublease involves the original tenant subleasing the property to the sublessee with the landlord's involvement. This typically occurs when the landlord consents to the sublease and may require the sublessee to become a direct tenant under a new lease agreement with the landlord.

  • Fixed-Term Sublease: A fixed-term sublease is when the sublease agreement has a specific start and end date, which may or may not coincide with the original lease term.

  • Month-to-Month Sublease: In a month-to-month sublease, the sublease agreement continues on a monthly basis until either party decides to terminate it with proper notice.

  • Renewable Sublease: A renewable sublease includes provisions allowing for the renewal of the sublease for additional periods upon mutual agreement between the sublessor and the sublessee.

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