Semi Gross & Gross Rents
- Thread starter georgie1
- Start date
Gross rent - all inclusive of outgoings ie tenant May pay for water usage but no other costs as the owner pays all costs
Semi-gross: tenant pays selected outgoings or outgoings over a base year amount ie insurance, rates, land tax etc over a predetermined amount.
Semi-gross: tenant pays selected outgoings or outgoings over a base year amount ie insurance, rates, land tax etc over a predetermined amount.
Thanks for that, could you elaborate on the base year? For some reason semi-gross just seems like its gross rent but split apart for no reason
Nothing is simple in this game....anyone who says so ain't telling you the real world facts.
Scott has given a good account above.
I've got one retail Tenant on a semi-gross Lease.
He pays rent, plus chips in his share for { CR / WR / LT / Ins }
He pays nothing for any of the other operating expenses to keep the place running, like { aircon / audit fees / music / car park maintenance / cleaning wages / cleaning consumables / fire and safety costs / garbage removal / gardening / light and power / pest control / repairs and maintenance / security }
So...
A gross lease would only require that the Tenant pay rent.
A semi-gross Lease would require the Tenant to pay rent, plus chips in their share for { CR / WR / LT / Ins }.
A nett Lease would require the Tenant to pay rent, plus chips in their share for everything listed.
What I've found - especially for retail Tenants - by far the best method is to simply wrap the entire expenses up into one big fat number and call that the rent. They are happy to pay that.
Come back at them all the time presenting them with extra little payments all the time and they kick up a fuss.
A simple analogy.
Ask them to pay $ 8 rent and $ 2 outgoings. They'll pay the $ 8 rent bill no problems and b1tch and moan all day long over the other $ 2.
Ask them to pay $ 10 and nothing else....they'll pay that gladly...and life is bliss for both of you !!
IMHO, nett Leases only work for really big Tenants who act professionally.
Base Year:
If your outgoings (as owner) for the financial year 2011/12 are $10,000 (insurance, rates, land tax, water service etc) and the lease starts in May 2011 you have established a base year outgoings figure (it can be 10 years ago, doesn't matter). If the costs increase to $10,500 in 2012/13, then the tenant pays you $500 extra for the increase in the base year. (if it drops, you don't generally give anything away).
There are many ways of determining base year amounts and adjusting them (just depends upon what you can agree upon).
If your outgoings (as owner) for the financial year 2011/12 are $10,000 (insurance, rates, land tax, water service etc) and the lease starts in May 2011 you have established a base year outgoings figure (it can be 10 years ago, doesn't matter). If the costs increase to $10,500 in 2012/13, then the tenant pays you $500 extra for the increase in the base year. (if it drops, you don't generally give anything away).
There are many ways of determining base year amounts and adjusting them (just depends upon what you can agree upon).
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