FISCHBACH TENANT REPRESENTATION

Leases are confusing. Most business owners have to deal with a lease only every five years or so, which makes the confusion all the more aggravating. You've got plenty to do other than go to "Lease School."

On the other hand your landlord deals with leases every day and could teach at "Lease School." Not a fair fight. But no worries. As a tennant rep, I deal with leases every day too and can put you on a fair footing with any landlord regarding any issue.

I get a lot of questions about types and names of leases. These are basically just different ways in which you hand over your money to the landlord. There is no way around paying the landlord, but leases can often be structured to fit the tenant's needs and save money. It's worth looking at the options.

Gross Rent

Most Class^? A & B office buildings quote on a "Gross Rent" basis, sometimes called "Full Service". This is an all inclusive rent.^? Nothing left out of the rent check each month. For most business people this is a good arrangement. The landlord takes care of your janitorial services and your power and water. You pay him a single check and you're done. If something breaks, you call the landlord to come fix it.

This would be an ideal arrangement if it weren't for sales tax. Tenants must pay seven percent sales tax in Florida, not only on the rent, but also on the maintenance and utility costs that the landlord is simply passing through.

Yes. It's double taxation. The state collect when the janitorial service and utilities sell to the landlord. The state collects again when the landlord sells these services to you. Bummer.

Modified Gross

You can see where some tenants might do better. Suppose your brother-in-law has a cleaning service. He might offer you a contract that's cheaper than what the landlord is offering. In addition, you'd save money on sales tax.

In this case you'd be inclined to negotiate a gross lease^? with your landlord modified by your providing janitorial services and not him, a Modified Gross Lease.

Net Rent

Net Rent includes no services or utilities, but does include the landlord/owner paying property taxes, property maintenance (sometimes to a varying degree) and property insurance. The tenant is paying even less sales tax

NNN or Triple Net

Or "Absolute Rent"; everything... all building maintenance, capital improvements, insurance, property taxes, utilities and services are the tenant's responsibility just as if the tenant owned the property. In this case the tenant is paying sales tax only on the rent. Triple net leases are usually favored by large branded companies looking for long-term arrangements.

No Bad Guys

None of these lease concepts are bad, unless they are completely ill-suited to your business needs. They are just different and each has its place. So how to decide?

When my clients get close to deciding on a building or buildings to lease, I even-up all the interesting offers and considerations on a not-complicated spreadsheets. They can confidently compare. Bottom-line occupancy cost^? for each lease type will be clear and unmuddied by in-crowd jargon.

You're in and out of "Lease School" with straight "A's."