Navigating the world of leases in American real estate can be challenging, especially if you are not familiar with the key terms and concepts. One of the most discussed topics is how additional costs, such as taxes and insurance, are handled. Who pays what? How does this affect the landlord and tenant? To understand it, it is essential to know the different types of leases.

The Double Net Lease Case

Let's imagine a homeowner who pays the rent for her premises, but also assumes a portion of the property taxes and insurance. In American real estate parlance, she has signed a “Double Net Lease.”

In a Double Net Lease, the tenant agrees to pay the base rent plus a proportion of the property taxes and insurance. However, generally does not cover maintenance costs. This type of lease benefits both parties: the owner has the security that certain fixed costs will be shared, while the tenant can negotiate a lower base rent by accepting these responsibilities.

Comparing to Other Types of Leases

• GROSS Lease: In a GROSS Lease, the tenant pays a fixed amount, and it is the owner who assumes all additional costs such as taxes, insurance and maintenance. This type of lease is simple and predictable for the tenant, since they know that they will pay the same amount month after month.
• TRIPLE NET Lease: This is longer than the Double Net Lease. Here, the tenant is responsible for three types of additional costs: taxes, insurance and maintenance costs. It is one of the most favorable leases for owners, since it transfers most of the variable costs to the tenant.
• RESIDENTIAL Lease: As the name suggests, it refers to residential rentals and does not generally involve sharing costs of taxes, insurance or maintenance. It is designed to protect tenants' rights and ensure that homes are habitable.

Conclusion

Understanding the type of lease you are signing, whether you are an owner or a tenant, is crucial. Each type has its advantages and disadvantages, and it is essential to be informed to make wise decisions. In the case of our owner, the Double Net Lease is the one that best adapts to her needs, sharing responsibilities and seeking balance in the complex world of American real estate.