Lease Terms: Types and What is Included
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Lease terms are vital to understand and negotiate with future tenants. Offering the wrong types of leases or lease terms can obligate you to meet responsibilities you didn’t originally intend to handle. The right lease terms can also protect your legal rights and foster a positive relationship between you and commercial renters.
In this article, we cover everything a commercial landlord would want to know about lease terms and how they affect your commercial lease agreements :
What are Lease Terms?
Lease terms are the contract terms of a lease agreement between a lessee, usually the tenant, and a lessor, typically the landlord. The legal contract includes lease terms to establish the period of time by which the lease will last, contractual obligations, and more.
What’s Included in Normal Lease Terms?
It’s essential to approach commercial lease negotiations with a firm grasp of the meaning of your terms. Standard commercial lease clauses include vital and anticipated conditions. Not including them could signal to prospective tenants that your office or building space may not be the right legal fit for them.
Commercial landlords typically include the following terms in a normal lease:
- Parties. Identify the parties correctly since incorrect identification can result in severe legal headaches should a dispute arise later. Make sure to correctly identify the parties who might need to be held to the terms of the lease later. For example, listing someone’s name has a much different impact than using their LLC. If you accidentally sign a lease with a person when you intended to sign it with their business, it could be harder to collect on defaulted rent in some situations.
- Premises. The premises clause identifies the property that the lessee will rent. If you’re leasing an entire commercial building, you can insert the street address and building name. On the other hand, renting office space requires landlords to be more specific when describing what rent includes, such as suite number, amenities access, and more.
- Use. A use clause establishes the parameters for what activities you will allow in the rented space. The restrictions can be as broad or as specific as you prefer. In general, you should avoid placing severe restrictions on your use of the rented space since it could deter well-qualified tenants who want flexibility in how they use the space.
- Term Length. The term length clause details the duration of the lease and termination dates. According to Business News Daily, the average commercial lease term lasts three to five years. A lease term can be either fixed (for a specific duration) or periodic (renewed automatically at the end of each period).
- Rent. Monthly rent is critical to negotiating with prospective tenants before drafting the lease agreement. Carefully draft the lease clauses to determine to account for security deposits, utilities, office rent, and more.
- Modifications. A significant portion of your lease should address this topic if a tenant needs space modifications. You and the lessee will need to agree on designers, work performances, project completions, and obligations.
- Amenities. Amenities clauses in the lease are likely to address practical arrangements you have with your tenants, such as parking and business signs. While negotiating these terms, you and the tenant attempt to integrate your business needs seamlessly. When executed well, these amenities will add to the success and convenience of a tenancy for both parties.
- Insurance. Insurance products are available to help tenants pay for the risks associated with commercial leasing, including liability insurance or property insurance, should an unanticipated issue arise. You’ll need to consider which types of insurance are appropriate for your target tenancies so that you have the correct terms prepared in your commercial leases.
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Types of Commercial Leases
The types of commercial leases you offer tenants significantly impact your future responsibilities. There are several distinct types of commercial leases. Understanding how each one works will empower you to make informed decisions about potential arrangements
Types of commercial lease agreements include:
- Single Net (N) Leases. Single net (N) leases, or net lease, require tenants to pay some or all of the property taxes, while the landlord is responsible for property insurance and maintenance. A landlord might use this agreement to save money on property taxes or ensure they can pay property taxes on time. Apart from this advantage, the landlord receives few benefits and remains responsible for most of the building’s operations.
- Double Net (NN) Leases. Double net (NNN) leases are used when the tenant is responsible for some or all property taxes and insurance. The landlord is responsible for all maintenance and repair costs, like in a single-net lease. This option is a more common type of commercial lease in multi-tenant buildings.
- Triple Net (NNN) Leases. Triple net (NNN) leases are when the tenant pays for all or some property taxes, insurance, and maintenance. This type of lease offers landlords several advantages, including remaining more “hands-off,” which allows for more freedom. However, it’s essential to remember that base rents will be much lower to offset the tenant’s obligations.
- Absolute NNN Leases. NNN absolute leases are the opposite of a gross lease, which include all expenses. Under the absolute NNN lease, the tenant is responsible for all property costs and assumes all possible risks under this arrangement. This type is the least common of commercial leases, as few tenants are willing to assume such a high level of risk. While this lease effectively allows them to own a building without purchasing it, they bear all the risk and do not benefit from the property’s appreciation in value.
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Gross Lease vs. Net Lease
Gross leases are full-service leases since tenants pay a share of expenses proportionate to the building. In contrast, a net lease requires the tenant to pay rent and other costs associated with owning, operating, and maintaining the property.
Let’s take a closer look at gross leases vs. net leases separately for a better understanding of the differences:
What Is a Gross Lease?
Gross leases are ones in which the tenant pays a flat fee for their rent. Landlords may account for incidental tenant expenses, such as property taxes, insurance, and utilities, by building them into the rent amount. A gross lease is great for commercial office leases.
What Is a Net Lease?
Net leases are lease agreements in which the tenant pays a portion or all of the property’s taxes, insurance, or maintenance costs in addition to the base rent. Because the tenant pays directly for some of these expenses, the amount they pay may vary from month to month. Net leases are popular in commercial lease agreements for entire building office leases since they make management more automated while still benefiting from property ownership.
Other Terms to Know in Commercial Leases
Another essential term to understand is the idea of lease vs. rent since the two terms are very different. The primary difference is the term period they cover. Lease agreements tend to last in 12-month periods for up to five or ten years. Rental agreements are much shorter and typically last only thirty days.
It is also worth noting that residential lease agreements typically use the term rent. It is perfectly acceptable to create a rental agreement in this situation. You can refer to your document as a lease agreement for commercial tenants, regardless of the period offered.
Get Legal Help with Lease Terms
If your business needs legal help with lease terms, work with commercial lease lawyers to offer legal advice on how to negotiate a commercial lease and finalize the proper documents. Connect with a legal professional for commercial lease help in your state today.
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Kenneth E. Gray, Jr. is a business and tax attorney who advises entrepreneurs, investors, and closely held companies on transactions, tax planning, disputes, and long-term wealth structuring. He focuses on helping clients make legally sound decisions that also make business sense. Ken’s practice includes business formation and restructuring, mergers and acquisitions, private investments and fundraising transactions, contract drafting and negotiation, and cross-border matters. He also maintains a significant tax practice, advising on federal and state structuring, specialty filings (including partnership, corporate, and non-resident matters), and representing clients in disputes before the U.S. Tax Court and other federal and state tribunals. In addition to his transactional work, Ken handles commercial and business litigation, including tax controversies, financial disputes, and partnership matters. His litigation experience informs how he structures deals and governance documents, with an eye toward preventing disputes before they arise. Ken also advises individuals and families on estate planning, trust formation, tax-efficient wealth transfer strategies, and probate administration, including planning involving closely held businesses and foreign assets. Before practicing law, Ken worked in banking and private equity, including managing a $5 billion emerging markets fund-of-funds portfolio at the U.S. Overseas Private Investment Corporation (OPIC) and serving in equity research at ABN AMRO. That financial background allows him to understand transactions from both the legal and capital perspective. He holds a J.D. from Georgetown University Law Center and an MBA from Yale University. He practices before the U.S. Tax Court, various state courts, and other federal courts.
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Allen L.
Protect what matters most — with clarity, care, and flat-rate planning. Protecting your family and your future shouldn’t feel confusing or overwhelming. My practice is built on the idea that strong legal planning can be simple, strategic, and empowering. I work with clients who want peace of mind — not just paperwork — through estate plans that truly fit their goals, families, and businesses. I focus on estate planning, asset protection, and business succession, helping individuals and entrepreneurs organize their assets, reduce risk, and prepare for every stage of life. Whether you’re setting up your first living trust, shielding your business from liability, or updating an existing estate plan, you’ll receive clear guidance, fixed-fee pricing, and responsive support from start to finish. Each plan I design is tailored to your real-world priorities: preserving wealth, avoiding unnecessary taxes and probate, and ensuring the people you love are protected when it matters most. My goal is simple — to make sure everything you’ve built stays safe, secure, and exactly where you intend it to go. Other services: --Simple wills and powers of attorney --Living trusts for small estates --Buy-sell agreements for family businesses --Service Agreements (consulting, marketing, software, design, etc.) --Independent Contractor Agreements --Employment contracts and offer letters --Non-compete, non-solicitation, or confidentiality agreements --Employee handbooks or HR policy updates --Termination or severance agreements --NDAs (Non-Disclosure Agreements) --Partnership or Joint Venture Agreements --Sales or Vendor Contracts --Licensing or IP Agreements --LLC or S-Corp formation filings --Operating Agreements / Shareholder Agreements --Founder or Investor Agreements --Bylaws and Minutes templates --Registered agent setup guidance --Commercial lease drafting or review --Residential lease review --Purchase & sale agreements --Short-term rental (Airbnb) contracts --Property management agreements
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David U.
For the last 25 years I've focused on representing businesses and entrepreneurs in transactional law deals, including LLC creation, operation and sale of businesses; real estate sales and leasing; and general contract negotiation and drafting. While I've helped all manner of businesses work out a variety of contract and business matters, I am an expert at helping clients with buying and selling commercial properties including multi-family and office projects and buildings, subdivisions, and retail shopping centers. I am also a recognized expert negotiating leases for retail and office tenants and landlords. Over 25 years I've honed my skills a lawyer at one of the largest law firms in the world, an elite real estate boutique in Aspen, Colorado and a highly regarded firm based in Denver, Colorado, before starting my own practice in 2016. Since 2016 I've been helping my clients with real estate and business deals. I'm a commercial real estate and business expert with a passion for helping clients forge successful ventures in an efficient and understandable manner.
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Lease Terms
New York
Am I liable for august rent payment if I’m granted a 30 day notice on july 1 st?
I am currently living in a apartment with a lease agreement from March trough August 31st. I am to make a pay on the 1st of every month. As per the agreement I can choose to renew the lease and the end of the term in August. The lease then goes in to mention if I choose not to not to renew the least I will be granted a 30 day notice on July 1st. Does this mean I can leave the end of July and I’m not liable for August rental payment? Although it stated my term is until august 31st?
Angela Y.
Hi there, For a definitive answer, a lawyer would need to see the exact lease language; however, it is very unlikely that not renewing a lease would result in a free month of rent (unless there is another part of the lease that is relevant or there was an error in creating the document).
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