Many real estate investors begin in residential real estate but eventually move into commercial real estate as they become more comfortable. As a result, real estate investors are often familiar with Rhode Island’s laws governing residential leases. Rhode Island’s law governing residential leases is explicit in what can and cannot be delegated, and generally holds the landlord to retain responsibility over the property. However, the landlord-tenant relationships in commercial real estate are not governed by the same restrictive legislation, and thus allow for significantly greater flexibility in allocating rights and obligations between the landlord and tenant. In addition to real estate investors, business owners seeking their first lease, renegotiating an existing lease, or pursuing a new location may find the flexibility in commercial leasing overwhelming.
The Differences Between Single, Double, and Triple Net Leases
A common example of the difference between common residential and commercial leases is responsibility for the building itself. Whereas the landlord is almost always responsible for the condition of the building in a residential lease, responsibility for the building’s structure can be that of the tenant in a commercial lease. The greater flexibility to allocate responsibilities between the landlord and the tenant in commercial leases has resulted in a basic reference to leases as being single, double, or triple net, with triple net being the most common form of a commercial lease in Rhode Island. The defining characteristic of the single net, double net, and triple net leases are given below:
- Single net lease. The tenant is responsible for paying property taxes in addition to rent. This is also referred to as a “net lease.”
- Double net lease. The tenant is responsible for paying property taxes and insurance in addition to rent.
- Triple net lease. The tenant is responsible for paying property taxes, insurance, and the cost of all structural/building maintenance and repairs.
Additionally, some commercial leases are structured similarly to residential leases in regard to the tenants’ only obligation being to pay rent. These leases, where the tenant is only responsible for paying rent, are called “gross leases.”
Contact Our Experienced Real Estate Attorneys Today
While this may all seem confusing, the different obligations are allocations of risk between the tenant and landlord. Experienced real estate lawyers can help you understand the different leasing structures and which are most appropriate for your situation and goals.
At PALUMBO LAW, our attorneys have successfully represented businesses and investors in commercial lease negotiations across Rhode Island and have a thorough understanding of the market. Similarly, our diverse representation ensures that we understand your needs and goals and negotiate your commercial lease accordingly.
Whether you’re a business seeking a new location or a commercial landlord seeking a new tenant, we are here to help. If you’re interested in speaking about commercial leasing or investing in commercial real estate, or have more specific questions, please contact our office to set up a consultation or complete the contact form.