Long-term leases typically apply to commercial buildings.
A lease is the agreement you enter into when you rent an apartment or a car; the lease usually consists of a written agreement that sets out the amount of rent you will pay, the period during which you are responsible for paying it, and other terms. A long-term lease is simply a lease where the contract term is ten years or more. A long-term lease is typically an option used for commercial property rentals – your apartment or house rental should not be subject to a long-term lease unless in very special circumstances.
Tenants under a lease for ten years or more are under a long-term lease.
A long-term lease has certain advantages and disadvantages. Fixing the rent at a stable price can be good or bad. Rent often tends upward, so a long-term lease can potentially save you money by locking you in at a set price for many years. However, if the market crashes and the rent suddenly drops, you will still be responsible for the same amount of rent. Also, if you want to move your business to another location, you may have to choose between waiting for the contract, however long it may be, or terminating the contract and being severely penalized.
Renting an apartment should generally not be subject to a long-term lease.
When renting a property, it’s a good idea to know the language used, financial or lease-related terms, and what they mean. A long-term lease is just one of many different types of leases defined by the duration of the lease. A pure or true lease is typically a very short-term lease; it is considered a “real” lease because once it ends, it is over – the lessee cannot renew the lease or buy the property. Property covered by a pure lease is typically some type of equipment.
Leases are also categorized in terms of the percentage of the useful life of the property for which they were leased. A lease can be a purchase, such as a rent-to-own lease, or simply a lease that covers most of the expected life of the property; the opposite is an operating lease, where the lease term is only a fraction of the property’s useful life. For example, most residential properties are leased under operating leases, as lease terms typically run from six months to a year.
Some leases may take into account increases or decreases in the market. A step-down lease contains a provision in the contract for reductions in rent, while a step-up lease contains a provision in the contract for increases in rent. These lease types can be combined with other lease types, such as a long-term lease, to ensure that the lease amount remains fair over time.
Different types of tenancy place different levels of responsibility on the landlord and tenant. Gross tenancy is the most common form of residential tenancy, requiring the landlord to take care of any maintenance, property insurance, or taxes on the property. A double net lease requires the lessee to pay all insurance and taxes related to the use of the property, while the lessor is still responsible for any maintenance that needs to be done on the property. A triple net lease makes the tenant responsible for maintenance as well as insurance and taxes. In a net lease or closed lease, the tenant is responsible for virtually all expenses associated with the property.
Another type of lease is the sandwich lease, also known as a “sublease”. A sandwich rental occurs when the tenant rents the property to another individual. The tenant becomes lessee and lessor, acting as a kind of “intermediary”.
Whether you intend to rent a property for professional or personal purposes, for a short or extended period, it is important to know the language of the business. A long-term rental may or may not be right for you and can easily be combined with other types of rentals, so it’s important to be familiar with all the terms you may encounter.