What are the three types of leases commonly recognized?

The three types of leases commonly recognized in real estate include the expense stop lease, base year lease, and triple net lease.

An expense stop lease establishes a threshold amount of operating expenses that the landlord will cover; any costs beyond this amount are the responsibility of the tenant. This arrangement allows landlords to maintain control over expenses while giving tenants the incentive to manage costs effectively, as they benefit directly from any savings below the expense stop level.

A base year lease sets an initial year of operating costs that the landlord covers, with tenants typically paying for increases in operating expenses beyond this base year. This structure provides predictability for tenants as they know their expenses will not exceed the base year amount unless there are increases.

The triple net lease, often used for commercial properties, requires the tenant to pay all the costs associated with the property, including property taxes, insurance, and maintenance, in addition to rent. This type of lease minimizes the financial risk to landlords and allows tenants to have greater control over the operating expenses associated with the property.

These three types of leases are foundational in commercial leasing, as they outline the financial responsibilities and expectations between landlords and tenants, creating clear frameworks for managing costs and liabilities. The other options contain lease types that are either less common or