Investigate What Lease Labels Really Mean
Q: I’m negotiating a lease that references labels that I’ve seen before—such as “gross lease,” “net lease,” “double net lease,” “triple net lease,” “modified gross lease,” and “modified net lease.” Can I rely on the commonly thought of meaning of these terms?
A: No, it’s important to decode lease labels for yourself, because, though the owner may refer to your lease as a gross lease or net lease (or a variation of those labels) and the real estate industry often uses those lease labels, there are no universal definitions for those lease labels. And while a double net (net-net) or triple net (net-net-net) lease will make you responsible for paying certain costs separately from your base rent, it’s unclear which “net” refers to which cost. As a result, you may think a double-net lease obligates you to pay taxes and CAM costs/operating expenses separately from your base rent, but the owner may think it obligates you to pay insurance instead of CAM costs/operating expenses.
And if you’re concerned about the specific items that will be included in CAM costs, you can follow the detailed wish list of more than 60 exclusions tenants should fight for, and negotiation tips for making the owner’s CAM definition work in your favor, in “Narrow Owner’s Proposed Charges in CAM Clause,” available to subscribers here.