Commercial Lease Structures

Commercial leases differ fundamentally from residential leases in complexity, negotiability, and cost allocation. The central question is: who pays operating expenses — property taxes, insurance, and common area maintenance (CAM)? The answer varies by lease type and has profound implications for both landlord returns and tenant costs. Unlike residential leases where the landlord typically absorbs all operating costs, commercial leases allocate these expenses through structures ranging from gross leases (landlord pays everything) to triple-net leases (tenant pays everything). Understanding lease structures is essential for evaluating the true cost of occupancy and the real income from investment properties.