- Straight Lease:
- Rent which is determined by location, quantity of space, and use is negotiated by a fixed prices that is calculated on a per square foot basis.
- Reasons for increase in rent is usually to justify by an increase in insurance, taxes, or other related costs.
- Straight lease is sometime used as an incentive to attract anchor tenants into new establishment or to attract small-medium setups with uncertain sale volumes.
- Net Lease:
- This is similar to straight lease but with the provisions that the tenant takes over the managerial duties which include payments of operating expenses, taxes, insurance, utilities and other maintenance.
- At most, owner will pay for the debt service of the property and the maintenance of the common areas.
- Net lease is ideal for tenant that occupies for its exclusive use, a major part of the property. Sometimes, such tenants may have specially installed machinery that incurs high operating costs on the property.
- Percentage Lease:
- Apart from rent determined by a fixed charge, negotiated lease includes a portion of rent based on sales volume.
- Sometime this is offered to established anchor tenant who has established sales records.
- Step-up Lease:
- Rent, as stated in the contact will be periodically increased.
- This could be use as an incentive to encourage new business setups where sales volumes are expected to pick up in the future.
- Step-down lease:
- The opposite of Step-up Lease, this calls for a periodic decreases in rents.
- It may be used as an incentive to encourage tenants to take up longer leases.
- Reappraisal Lease:
- Rents are periodically appraised at specified intervals over the term of the lease.
- This method is often used when the rental market is generally quite volatile.
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