What determines the type of lease contract in commercial property management?

The type of lease contract in commercial property management is primarily determined by the method by which the tenant pays rent. Leases can be classified into various types, such as gross leases, net leases, percentage leases, and modified gross leases. Each type defines the specific responsibilities and payment structure between the landlord and tenant.

For example, in a gross lease, the tenant pays a fixed rent, and the landlord covers most of the property expenses, such as maintenance, property taxes, and insurance. In contrast, a net lease requires the tenant to pay additional costs on top of the base rent, like property taxes or maintenance expenses. This variability impacts cash flow, profit margins, and overall financial responsibilities for both parties involved, thus making the method of payment pivotal in determining the lease's structure.

Other factors, such as the location, size, or ownership structure of the property, may influence the negotiation and specific conditions of the contract but do not fundamentally determine the type of lease itself. Instead, they can affect the overall marketability, rental rates, and terms but are secondary to how rent is structured and paid.