Commercial Real Estate

Understanding Your Commercial Lease: Operating Expenses, including Common Area Maintenance (CAM) and Other Pass-Through Expenses

To understand the true cost of your commercial lease, you will need to understand operating expense pass through provisions. Expense pass through provisions detail common area maintenance (CAM) expenses, taxes, insurance expenses, and other “pass through” expenses. These provisions are called “pass through provisions,” because the amount the landlord has to pay for these expenses is “passed through” directly to the tenant. The details of operating expense pass through provisions are important to determine the overall value of the deal for both the tenant and landlord. 

While these expenses are always important for a commercial tenant to understand, they are particularly important in lease structures where the tenant takes on the risk of expense inflation, such as NNN and Base Year...

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Commercial Real Estate

Understanding Your Commercial Lease: Triple Net (NNN), Base Year, Gross, Percentage, and Other Commercial Lease Structures

To understand your commercial lease, it is important to understand your commercial lease structure. While no two leases are really the same, there are a few major types of commercial lease structures that most leases fit into. Understanding your lease structure will help you understand the major economic drivers affecting your lease, including the true costs and the major costly risks. And understanding these issues will help you get the most value out of your commercial lease. This post will give you a basic overview of the different commercial lease structures:

Triple Net (or NNN) Lease Base Year Lease Gross Lease Percentage Rent Lease Absolute/Total Net Lease Modified Gross Lease Triple Net (NNN) Lease

The triple net lease is a common lease, particularly in the retail market. The “triple...

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