UNDERSTANDING COMMERCIAL LEASING IN FLORIDA: Types, Terms, and Trends

📑 Main Types of Commercial Leases

Property owners in Florida use different types of lease agreements depending on the type of property, tenant profile, and deal structure. The most common is:

Triple Net Lease (NNN)

• The tenant pays base rent + property taxes + insurance + maintenance (CAM – Common Area Maintenance). Maintenance usually includes electrical, plumbing, and HVAC. In general, the landlord is only responsible for structural and roof maintenance.
• Very common for freestanding retail properties, industrial warehouses, and medical clinics.
• Most operational responsibilities are on the tenant.

Other lease types (less common today):

Gross Lease (Full-Service Lease)

• The tenant pays a fixed rent amount.
• The landlord covers all property expenses: taxes, insurance, maintenance, and utilities.
• Typical in multi-tenant office buildings.

Modified Gross Lease

• A hybrid model: the tenant pays base rent + some shared expenses (like cleaning or electricity).
• Usually negotiated case-by-case.
• Popular in small office or medical spaces.

Percentage Lease

• The tenant pays base rent + a percentage of gross sales.
• Common in retail spaces, especially malls or shopping centers.
• Used when landlords want to share in the business’s success.
• Usually includes a breakpoint: the percentage is only applied on sales above a certain threshol

⚙️ How the Leasing Process Works

1. Property Search

The tenant works with a commercial real estate broker to identify suitable properties based on location, zoning, visibility, size, and budget. An experienced broker will help identify potential risks and/or advantages between options.

2. LOI – Letter of Intent

Once the desired property is identified, the broker prepares an offer/proposal. This document is non-binding, and only outlines the intent to lease and the main proposed terms: rental amount, lease duration, responsibilities, use, and potential allowances for improvements (TI – Tenant Improvements).

The LOI will also define a due diligence period during which both tenant and landlord work out the final lease agreement.

Depending on the conditions (especially if the tenant asks for an extended due diligence period), the landlord may request a non-refundable deposit.

3. Lease Negotiation

If the terms in the LOI are accepted by the landlord, the lease agreement is drafted. Usually, the landlord’s attorney prepares the contract. The tenant may also engage an attorney to assist during this process.

Some of the terms discussed include:

• Rent structure (base + fixed CAM or percentage)
• Annual increases (escalation clauses)
• Property improvements (TI allowance)
• Repair/maintenance responsibilities
• Renewal options and exclusivity clauses

4. Due Diligence

The period between offer acceptance and final commitment is known as the Due Diligence Period. During this time, the tenant may verify zoning compatibility, obtain required permits, and evaluate the condition of the property (e.g., inspections).

During due diligence, the tenant may walk away without penalty (unless a non-refundable deposit was negotiated).

5. Lease Execution

Once finalized, the lease agreement is signed and deposits are made.

6. Build-Out & Occupancy

The tenant completes any necessary interior improvements using TI allowance (if negotiated) or personal funds.

📈 Current Market Practices in Florida (2025)

• Triple Net Leases (NNN) dominate retail and industrial sectors.
• Office leases are shifting toward shorter terms or more flexible models such as Modified Gross.
• Landlords are increasingly offering TI allowances (Tenant Improvements) to attract quality tenants in competitive markets.
• Retail centers often include exclusivity clauses to prevent direct competition among tenants (e.g., only one pizzeria or hair salon in the plaza).

🧾 Common Lease Terms

• Base Rent: Fixed monthly rent amount.
• CAM (Common Area Maintenance): Covers maintenance of shared spaces (landscaping, parking, lighting).
• Escalation Clause: Annual rent increase (e.g., 3% or tied to CPI).
• Use Clause: Defines the permitted use of the space (e.g., retail, office, restaurant).
• Exclusive Use Clause: Prevents the landlord from leasing to direct competitors nearby.
• Personal Guarantee: Personal financial backing, often required for small businesses.

🏗️ Responsibilities in a Typical Commercial Lease

Expense/Item	Usually Covered by Landlord (varies by lease)	Usually Covered by Tenant
Structural Repairs	Yes (in NNN, passed through CAM)	No, unless otherwise negotiated
Property Taxes	No (paid by tenant in NNN or Percentage leases)	Yes
Insurance	Landlord holds policy; tenant reimburses	Yes, often shares cost
CAM / Maintenance	Yes, but generally passed through to tenant	Yes
Utilities	Sometimes included in Gross or Modified leases	Typically paid by tenant
Interior Improvements	Landlord may offer TI allowance	Tenant handles renovations/build-out

🔑 Final Considerations

1. In most cases, there’s limited room to negotiate price, especially when the property is owned by a large corporation or investment group (e.g., hedge funds). These owners are often inflexible and operate through managers or asset administrators—rarely can you access the actual property owner.
2. Lease agreements are also generally inflexible. Most are standardized and written to primarily protect the landlord’s interests, not the tenant’s.
3. When a company or individual applies to lease a commercial property, the landlord (or their manager) will assess the tenant’s risk, since if the business fails, the landlord will face high costs to find a new tenant and restore the space (this is less of an issue with warehouses since they require fewer modifications).
   a. Financial profile – They will review tax returns and bank statements to check for reserves and examine the tenant’s credit score. If the tenant is a foreigner with no U.S. credit history or Social Security number, they often ask for several months of rent upfront (in my experience, 2–9 months).
   b. They may request collateral or guarantees to ensure lease payments for the full lease term.
   c. The type of business planned for the space is also evaluated.
4. Tenants are responsible for rent until the end of the lease term. If the business closes early or relocates, the rent must still be paid in full unless otherwise negotiated.
5. Zoning laws in the U.S. are very strict. You cannot open just any type of business in any location. Zoning is based on urban planning studies that aim to balance housing, commercial, and industrial use. Commercial spaces are more tightly regulated than warehouses, which are typically evaluated for environmental or traffic impact.
6. There is no rental insurance system in the U.S. like in some other countries. A tenant must either qualify financially, pay a large deposit, or have a local guarantor.
7. Lease terms usually range from 1–5 years. Warehouse leases tend to be shorter. Most commercial leases offer at least one renewal option.
8. It’s illegal for real estate agents in the U.S. to offer legal advice or draft legal documents. That includes interpreting contract clauses or providing legal explanations. While real estate contracts used by agents are standardized and approved by attorney associations, both parties have the right to consult their own attorney when reviewing or negotiating the lease agreement.

• Understanding the lease structure (NNN, Gross, Modified Gross, Percentage) is essential for accurately evaluating total costs.
• Working with a broker and an attorney is strongly recommended to protect your interests.
• Many landlords offer incentives or flexible terms to secure long-term tenants—especially in mixed-use or commercial properties.

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