- Introduction
- Acknowledgements
- 1: Getting Ready
- 2: The Costs of Space
- 3: Understanding Credit
- 4: Professional Services
- 5: Finding Space
- 6: Residential Leases
- 7: Commercial and Industrial Leases
- Landlord's Responsibilities*
- Residential vs. Commercial/Industrial Leases
- Commercial/Industrial Lease Components
- Key Lease Clauses
- Negotiating a Lease
- Alternative Lease Arrangements
- Landlord's Responsibilities
- Know Your Landlord and Building Staff
- Collective Action
- Eviction or Lease Termination
- Resources: Chapter 7
- 8: Buying Real Estate
- 9: Types of Mortgages
- 10: The Mortgage Application
- 11: Ownership Models
- 12: Purchasing Alternatives
- 13: Chicago Zoning Ordinance
- 14: Chicago Building Code
- 15: Chicago's Neighborhoods
- 16: Property Taxes
- 17: When You Find a Property
- 18: Inspections
- 19: After Moving In
- 20: Insurance
- 21: Utilities
- 22: Rehabbing Your Space
- 23: Safe and Healthy Spaces
- 24: Green Practice
- 25: When Disputes Arise
- 26: Space Emergencies
- 27: Facility Development Planning
- Bibliography
7: Commercial and Industrial Leases
Depending on your needs, a commercial or industrial lease might be preferable to a residential lease or property purchase. (A lease is a legally binding contract between a landlord and/or property owner and a tenant that defines the rights and responsibilities of both parties, and includes information on duration, rent, use restrictions and other matters). Commercial and industrial leases are much more complex than residential leases, and should involve a lawyer's assistance. This chapter is not a substitute for legal advice, but raises fundamental points to consider when signing a commercial or industrial lease.
While previewing different properties is a must, actually making comparisons between spaces can be difficult. A space that seems reasonably priced at first glance might become very expensive when you add additional costs for property taxes, monthly utility fees, common area maintenance and other associated expenses.
Hidden costs of commercial and industrial leases are often found in the type of lease available. They include:
- Gross Lease: The tenant pays a monthly fixed rent to the landlord, and the landlord pays all operating expenses such as real estate taxes, insurance costs, repair costs, common area maintenance costs (CAM), and -- sometimes -- utilities. This is the primary lease type for residential properties.
- Net Lease: The tenant pays rent for the space plus a percentage of the operating expenses -- such as CAM, insurance costs and real estate taxes -- as well as utilities. CAM costs can include maintenance fees for common areas such as lobbies, bathrooms and elevators. Also known as double net (a.k.a. net-net) or triple net (a.k.a. net-net-net) leases, with the primary difference being how much of the operating expenses charged to the tenant. This chapter uses the broader term "net lease" to refer to all models and variations of net leases.
The following individuals and/or organizations contributed to the content of this chapter: Thomas Morsch, Esq., Northwestern University School of Law; William Rattner, Esq., Lawyers for the Creative Arts; and David P. Resnick, Esq., Foley and Lardner, LLP.