What does a net lease agreement cost? You may ask this question if you are exploring different types of commercial lease agreements for your business. So let’s explore this question and review some general information about net lease agreements and what they entail.
How Much Does a Net Lease Agreement Cost?
A net lease agreement is a commonly used commercial lease agreement between a landlord and a tenant. There are several types of net leases, but all of them require the tenant to pay for additional expenses on top of the monthly rental rate. The specific expenses covered by the tenant can vary depending on the type of net lease agreement.
Additional expenses include but are not limited to:
- Utilities
- Property taxes
- Property insurance
- Building repairs and maintenance
- Landscaping
- Snow removal
Net leases appeal to landlords who want a more hands-off approach to property management. For example, depending on the terms and conditions, the tenant could be entirely responsible for the commercial property, allowing the landlord to simply collect a rent payment each month.
Many property owners who use a net lease agreement choose to hire real estate lawyers to draft the contract. This ensures that the lease agreement contains all necessary terms, protects both parties, and is legally binding.
Based on ContractsCounsel’s marketplace data, the average cost of a net lease agreement is $507.22 across all states.
Types of Net Lease Agreements
There are four types of net leases used in commercial real estate.
- Single Net Lease. Abbreviated as “N Lease,” a single net lease requires the tenant to pay rent and property taxes. This is the net lease with the least risk for the tenant because the taxes are paid through the landlord, who ensures that the tax payments are made on time.
- Double Net Lease. A double net lease requires the tenant to pay rent, property taxes, and insurance. In addition, the landlord must pay for maintenance and repairs. Taxes and insurance are paid directly to the landlord.
- Triple Net Lease. A triple net lease also called an “NNN lease,” is the most commonly used net lease in commercial real estate. Under an NNN, the tenant pays rent, property taxes, insurance, and all additional expenses, including maintenance. As a result, this lease provides landlords with the least responsibility for the property. The specific responsibilities of the tenant and landlord should be outlined in the lease agreement.
- Modified Net Lease. A modified net lease has unique conditions in which the tenant pays additional expenses or a pro-rata share of costs.
What is Included in a Net Lease Agreement?
The terms in a net lease agreement will vary based on the property type, the type of net lease used, and the needs of both parties. Lease agreements are negotiable but must include the following basic information:
- Party Information. Names, business names, and contact information of the landlord and the tenant.
- Property Address. The address of the commercial property.
- Property Description. The property description includes square footage and any areas included in the lease, like parking or shared restrooms.
- Property Use. The use clause dictates how a tenant can use the property. It will include information about the tenant’s business and manner of operation.
- Lease Term. The duration of the lease includes starting and end dates and whether there is a renewal option.
- Rent Amount. The tenant will pay the landlord each month for the use of the commercial space.
- Additional Expenses. A list of other expenses and which party will be responsible for paying them. This should also include how fees are paid. For example, if the tenant is responsible for insurance, will they pay the landlord or insurance company directly?
- Security Deposit. Many lease agreements require a security deposit agreement to begin using the property. This section should also describe how the security deposit is returned to the tenant.
- Signatures. The agreement needs to be signed by both parties to be legally binding, and many states will also require a notary certification.
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Net Lease Agreement Drafting
Net lease agreements can be complicated depending on the type of lease and how additional expenses will be paid, so this legally binding contract must be drafted correctly. Therefore, it is always recommended that a landlord hire an experienced attorney to draft their lease agreement. A lawyer will ensure that the agreement contains all necessary terms, articles, and conditions to protect both parties.
Before beginning the draft for a net lease agreement, a lawyer will meet with the property owner to go over the specifics of the property and discuss the type of net lease that works for the landlord and their rental goals.
Net Lease Agreement Review
Commercial lease agreements are long-term commitments that could affect a tenant’s business. Therefore, it is essential that a tenant thoroughly understands the terms and conditions of the lease and that the lease is fair. Before signing a net lease agreement, a tenant should consult with a lawyer to review the draft.
A lawyer will review the agreement in the tenant’s best interests. They will ensure that the tenant understands all the terms and that the agreement is fair and legally binding.
Net Lease Agreement Drafting Cost
When a property owner hires a lawyer to draft a net lease agreement, they will be charged for the lawyer’s time and services. This can include:
- An initial consultation
- Drafting time
- Revisions
- Follow-up meetings
ContractsCounsel’s marketplace data shows that the average net lease agreement drafting costs are $600.00 across all states.
Net Lease Agreement Review Cost
If a tenant hires a lawyer to review their net lease agreement, the tenant will be responsible for their legal fees. Legal fees will include consultations, the time the lawyer takes to review the lease agreement, and any necessary revisions or negotiations.
ContractsCounsel’s marketplace data shows that the average cost to review a net lease agreement is $495.63 across all states.
How Do Lawyers Charge for Net Lease Agreements?
Hourly Rates for Net Lease Agreements
Hourly rates are the most common way that attorneys charge for their time. The lawyer will provide an hourly rate to be approved by the client and log time in a timesheet.
When the lawyer is finished drafting the net lease agreement, and legal services have ended, they will invoice the client for their total time. This is the safest way for the lawyer to charge clients because they are covered if the project takes more time than expected.
ContractsCounsel’s marketplace data shows that the average hourly rate for a commercial real estate lawyer ranges from $200 - $350 per hour.
Flat Fee Rates for Net Lease Agreements
Flat fee billing structures are becoming more popular for contract drafting projects. Lawyers will provide the client with a flat fee for the requested services. The benefit of flat fee billing is that it gives the client certainty on the project's total cost.
It is important to ensure the client knows what’s included with the fee before starting the project, as it may not include revisions, negotiations, or consultations.
ContractsCounsel’s marketplace data shows the average flat fee rate for a net lease agreement is $507.22.
Get Help with a Net Lease Agreement
Do you need help with a net lease agreement project? If so, post a project in ContractsCounsel’s marketplace to receive flat fee bids from commercial real estate lawyers to handle your project. All lawyers on the ContractsCounsel’s platform are vetted by our team to make sure you are provided with top tier service.
