Apartment Buildings/Multi-unit buildings- In order
for an apartment or multi-unit building to be considered commercial
property it must have 5 or more units. Some examples are; high-rise
apartment buildings, mid-rise apartment buildings, Co-op, Military
housing, and student housing.
Office Property- This type of property can comprise
of low-rise (walkup) offices; high-rise complexes; or office parks
(also called business parks). Office property can have several tenants
or a single occupant who may or may not be the owner.
Retail Properties- These are properties that are
occupied by one or more tenants and the property is used for retail
purposes. Retail properties could also be stand alone buildings,
but most times are part of a larger piece of property like strip
centers or large shopping malls.
Special Purpose- These properties are dictated
by the design and operation of the building. Some examples are;
Hotels, resorts, nursing homes, schools, and places of worship.
Industrial Properties- These properties are used
for the purpose of converting raw materials into finished products.
Industrial property includes all land and facilities used for heavy
and light manufacturing, storage, and distribution of goods.
Types of Commercial Leases
Gross Lease- The tenant pays a set amount of rent
with the landlord being responsible for paying property taxes, insurance
and other costs associated with owning the property.
Net Lease- The tenant pays the rent plus a portion
of the maintenance fees, insurance and other operating expenses.
The additional fees are based on the percentage of space is leased
vs. the total space of the property.
Shopping Center Lease- The tenant pays a base rate
in conjunction with the square footage of the retail facility. The
tenant is also usually responsible for some common charges and will
sometimes be required to pay a portion of their gross sales and
may also be assessed part of the property taxes. A shopping mall
lease will also include rules in regards to signage, common areas
including delivery areas, and hours of operation. In some circumstances
the landlord also may also be able to relocate the tenant.
Land Lease- The tenant pays rent on the land and
is responsible for building costs. Generally, all improvements to
the property will revert to the landlord upon termination of the
land lease.
Additional Terms You Should Be Familiar
With
Broker- A licensed agent who brings together buyers
and sellers, or a landlord and tenant. Most transactions will involve
two brokers, one representing the buyer or tenant and the other
representing the seller or landlord. All brokers must be licensed
in the state in which they conduct business.
Lease- An agreement between a tenant (lessee) and
a landlord (lessor) wherein the landlord grants the right of possession
to a tenant for a specified period of time (term) for a specified
amount of money (rent).
Sublease- When a current tenant leases the existing
space to another tenant. This usually occurs when the current tenant
does not need as much or any of the space that is currently being
leased. A sublease usually requires the approval of the landlord.
The existing tenant is still responsible for the amount remaining
on their lease and is responsible for collecting the rent from the
new tenant.
Build-to-suit- This when the landlord makes improvement
to the property based on the tenant’s specifications. The
cost is generally included in the lease terms.
Concessions- These are benefits or discounts granted
by the landlord to help close a deal. Some examples are, reduced
rent for a specific period of time, space remodeling, and paying
for utilities.
