If you decide to open a retail store in Michigan, you will probably look for a location that will provide good visibility and plenty of foot traffic. Once you have found the perfect location, you will be in a position to negotiate a lease with the landlord. This could be challenging because commercial leases are more complex than residential leases, and it usually takes lengthy discussions to reach an agreement that all parties are willing to accept. Before negotiations begin, you should know about the differences between gross leases, net leases and percentage leases.
Gross and net leases
If you sign a gross lease to rent a retail store, your rent will include property running costs like property taxes, insurance premiums and maintenance and repair expenses. You will not have to make these payments, but they will be included in your rent. Your rent will be lower if you sign a net lease, but you will be responsible for some of the property’s overhead. A single net lease will require you to pay property taxes, a double net lease will require you to pay property taxes and insurance premiums and a triple net lease will require you to pay property taxes, insurance premiums and building upkeep costs.
Percentage leases are commercial real estate arrangements that allow landlords and their tenants to share risks and profits. If you sign a percentage lease, you will pay lower rent and share your profits with your landlord. These leases are often signed by new companies that have great potential but little capital, and they usually include a provision that triggers profit sharing when a sales threshold is reached.
Commercial leases in general
There are many types of commercial lease available because no two businesses are the same. If you open a retail store, you could sign a gross or net lease that requires you to pay some or all of the property’s running costs. If you want to pay as little rent as possible, you could sign a percentage lease that entitles your landlord to a share of your profits.