You found the perfect barn that you want to lease. When you approach the owner about leasing the property, they state they will only offer a step-up lease. What does that mean?
Well, there are three common leases that landlords use when leasing properties. Some landlords prefer a step-up lease while others might use a straight (flat) lease or percentage lease.
Different Types of Leases
Straight (Flat) Lease
- Lease rate is constant throughout the term of the lease
- Typically used for 1-year lease terms
- Commonly seen when leasing apartments
Step Up Lease
- Escalates periodically at predetermined amounts
- This lease helps protect the landlord from various risks, like inflation or other costs
- Typically used when the lease term spans over multiple years
- Commonly seen when leasing commercial properties
Percentage Lease
- Tenant pays base rent and a percentage of sales revenue to landlord
- Landlords typically offers a decreased base rent since they will receive a percentage of profits
- Commonly seen when leasing retail centers
Besides knowing the type of lease for a property, make sure to discuss the services that the landlord will be providing. Some landlords will cover all expenses while other landlords make tenants pay for utilities, taxes, insurance, and any additional maintenance expenses.
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