Navigating commercial leases can feel like learning a new language — especially when you’re trying to focus on growing your business. Whether you’re leasing your first retail shop, expanding office space, or relocating your company in Louisville, the type of lease you sign can have a big impact on your finances.

In this guide, we’ll break down the most important types of commercial leases — in plain, no-fluff language — and show you how to choose the one that makes sense for your business goals.

What Types of Commercial Leases Should Louisville Businesses Know About?

There are several types of commercial leases that Louisville businesses should understand, including Full-Service (Gross) Lease, Modified Gross Lease, Triple Net Lease, Double Net Lease, Single Net Lease, and Percentage Lease.

Each lease type defines who is responsible for costs like base rent, utilities, property taxes, insurance, and building maintenance — and understanding the differences can save you serious money and stress down the line.

Full-Service (Gross) Lease

A Full-Service Lease (also known as a Gross Lease) is one of the most straightforward types of commercial leases — especially for businesses that want predictable monthly expenses.

In this lease structure, the landlord pays for most or all of the property’s operating costs. That typically includes building maintenance, property taxes, insurance, and sometimes even utilities like water and electricity. The tenant just pays a flat base rent, and that’s it — no surprises.

This lease is common in multi-tenant office buildings where expenses are shared across tenants but handled entirely by the landlord. It’s designed to make things simple for businesses that want to avoid juggling fluctuating bills every month.

Here’s a quick breakdown:

Key Benefits:

• Predictable monthly cost with no surprise expenses
• Saves time on managing bills and building upkeep
• Ideal for startups or small businesses with tight budgets

For example, one of my clients leased a small suite in a downtown Louisville office tower under a Full-Service Lease. She was launching her own therapy practice and didn’t want the hassle of paying for property insurance, building repairs, or worrying about shared utility costs. The simplicity of this lease gave her more freedom to focus on clients instead of the building.

If you’re looking for low-maintenance leasing, this might be your best bet — just make sure you understand exactly what’s included in the service package before signing.

Modified Gross Lease

A Modified Gross Lease offers a middle ground between a Full-Service Lease and a Triple Net Lease. With this type of lease, the tenant pays for some of the operating expenses, but not all. Typically, the base rent stays fixed, while things like utilities, insurance, or property taxes are split between the tenant and landlord based on what they agree to in the lease.

This setup allows for more flexibility. For example, you might only be responsible for utilities and janitorial services, while the landlord covers everything else, such as building maintenance and property taxes. The key here is that the lease is customizable.

I once helped a friend open a co-working space in Louisville’s Highlands neighborhood. She negotiated a Modified Gross Lease that only required her to pay for electricity and internet, while the landlord handled the rest. It gave her room to budget for furniture and marketing during her launch phase without getting overwhelmed by surprise fees.

Here are some common terms you might see in a Modified Gross Lease:

• Pro Rata Share – your fair portion of shared expenses
• Expense Stop – a cap after which you start paying certain costs
• Escalation Clause – gradual rent increases over time

Why it works for some businesses:

• Offers cost control with shared responsibility
• Easier to budget than a fully variable lease
• Flexible lease terms that can adapt to your business stage

A Modified Gross Lease is a solid choice for growing businesses that want some expense predictability but are okay with handling part of the operational load.

Triple Net (NNN) Lease

A Triple Net Lease, often abbreviated as NNN, is one of the most common and landlord-friendly types of commercial leases — especially in retail and standalone building settings.

With an NNN lease, the tenant pays for almost everything: the base rent, property taxes, building insurance, and maintenance costs. The landlord typically steps back from day-to-day expenses, and the tenant handles the bulk of ongoing property responsibilities.

Think of it as paying rent plus managing the property like you own it (without actually owning it).

Here’s what a typical NNN lease breakdown looks like:

This lease structure can work well if:

• You want a lower base rent
• You’re confident managing building-related expenses
• You’re leasing a standalone retail or restaurant space

Keep in mind that Triple Net Leases can involve fluctuating costs. For example, if property taxes or insurance rates rise, so do your expenses. That’s why it’s crucial to understand potential long-term costs before signing.

Landlords often include terms like:

• CAM (Common Area Maintenance) – your share of shared space upkeep
• Escalation Clause – periodic rent increases
• Lease Term Length – often 5+ years with renewal options

For financially stable or creditworthy tenants, NNN leases can offer location control and long-term cost savings — but they require careful financial planning.

Double Net (NN) Lease

A Double Net Lease — often called an NN lease — is a step between a Triple Net Lease and a Modified Gross Lease. In this setup, the tenant pays for property taxes and insurance, while the landlord covers building maintenance and repairs. You still pay base rent, of course, but you’re not responsible for everything.

This lease is common in multi-tenant properties where landlords want tenants to carry some of the operational load but still maintain responsibility for major upkeep.

Here’s how the costs typically break down:

A colleague of mine once signed a Double Net Lease for her boutique store in a small retail plaza just outside Louisville. She didn’t mind paying the insurance and property taxes because the base rent was reasonable. What made her feel secure, though, was knowing the landlord was still responsible for things like roof repairs and HVAC maintenance — big-ticket items she wasn’t prepared to handle yet.

This lease can be a great middle-ground if:

• You want some operational responsibility without being overwhelmed
• You prefer stable building maintenance handled by the landlord
• You’re in a multi-tenant building where shared responsibilities make sense

Just be sure to carefully review your lease term length, pro rata share (how taxes are divided), and any escalation clauses that could increase your rent over time.

Single Net (N) Lease

A Single Net Lease — or N Lease — is one of the simpler commercial lease types, but it’s not very common. In this structure, the tenant pays the base rent and property taxes, while the landlord pays for everything else, including insurance, utilities, and building maintenance.

It’s sometimes used as a starting point for negotiations or in short-term leases where the landlord wants to offload just a portion of the property’s expenses.

Here’s what it usually looks like:

When does a Single Net Lease make sense?

• For tenants who want limited responsibility
• For shorter lease term lengths
• When the landlord is willing to maintain control over the property

You’ll still need to understand your pro rata share if you’re in a shared space, and ask about escalation clauses that could increase costs over time.

While not as popular as other types like Triple Net Leases, an N Lease can work well for tenants who want to dip their toes into commercial leasing without jumping into full property management responsibilities.

Absolute Triple Net Lease

An Absolute Triple Net Lease takes the NNN lease concept one step further. Here, the tenant pays for everything — not just property taxes, insurance, and maintenance, but also major structural repairs, like the roof or foundation. The landlord pays nothing and has no involvement in the property’s upkeep or expenses.

This type of lease is often used in long-term agreements with creditworthy tenants — like national franchises or large retailers — who want total control of the property.

I remember consulting on a lease for a growing logistics company that signed an Absolute Triple Net Lease on a warehouse outside Louisville. The owner wanted full autonomy — and was confident managing HVAC systems, roof upkeep, and even property tax audits. It worked for them because they had the budget, staff, and experience to handle every aspect of the building, but for a smaller business, this lease could have been overwhelming.

Why choose an Absolute NNN Lease?

• You want complete control over the property
• You’re prepared for long-term financial responsibility
• You’re leasing a standalone building or custom-built space

Keep in mind: since the landlord has no obligations, these leases typically come with lower base rents and longer lease terms — often 10 to 20 years.

An Absolute Triple Net Lease can be a smart move for stable, established businesses — just make sure you’re ready to shoulder every cost, including roof repairs, liability insurance, and compliance-related upgrades.

Percentage Lease

A Percentage Lease is unique among commercial lease types because it ties part of your rent to your gross sales. With this lease, you pay a base rent plus a fixed percentage of your monthly revenue (usually after hitting a certain sales threshold). It’s commonly used in retail spaces, shopping centers, and malls.

This arrangement can be great for new businesses that want a lower base rent at the start — since the landlord shares in your success.

Here’s a simple breakdown:

One of my clients opened a boutique smoothie bar in a busy retail strip near Louisville’s East End. They opted for a Percentage Lease to keep costs down early on. The base rent was low, and they only paid more once sales took off in summer. It gave them breathing room in the slow months and aligned their success with the landlord’s incentives.

When does a Percentage Lease work best?

• For seasonal businesses or those with variable sales
• When you want lower fixed monthly costs
• In high-traffic retail environments

Just be sure to understand:

• The breakpoint (when the percentage rent kicks in)
• How gross sales are defined (before or after taxes/returns)
• Any caps or escalation clauses

A Percentage Lease is a great fit if your revenue fluctuates but you want a flexible structure that grows with your business.

Which Lease is Right for Your Louisville Business?

Choosing the right commercial lease isn’t just about price — it’s about matching the lease structure to your business’s needs, risk tolerance, and stage of growth. Let’s break it down.

Ask Yourself These Key Questions:

• Do I want predictable costs, or can I handle fluctuating expenses?
• Am I prepared to cover building maintenance, property taxes, or insurance?
• How long do I plan to stay in the space?
• Is my business seasonal, growing fast, or just starting out?

Lease Type Cheat Sheet:

Remember, you can often negotiate lease terms, especially if you’re committing to a longer lease term length or improving the space. Look closely at clauses like pro rata share, escalation clauses, and common area maintenance (CAM) costs.

There’s no one-size-fits-all answer — the best lease is the one that gives your business the flexibility, cost balance, and peace of mind it needs to thrive.

Key Terms and Concepts in Commercial Leases

If you’re looking at commercial lease agreements for the first time, you’ll come across a lot of terms that can be confusing. Don’t worry — here’s a breakdown of the most important concepts you’ll see, and what they really mean for your business.

1. Base Rent

This is your fixed monthly rent payment — the starting point of any lease. In a Full-Service Lease, it might be all you pay. In other leases like Triple Net, it’s just the beginning.

2. Common Area Maintenance (CAM)

These are shared property expenses like landscaping, hallway lighting, and parking lot cleaning. In leases like NNN or Modified Gross, your pro rata share of CAM costs will be added to your monthly bill.

3. Pro Rata Share

This is the percentage of shared expenses you owe based on how much space you’re renting. If you lease 25% of a building, you’ll typically pay 25% of shared costs like building maintenance and property taxes.

4. Escalation Clause

This clause lets landlords raise rent periodically — often annually — to account for inflation, increased operating costs, or market adjustments. Always ask how often and by how much your rent can increase.

5. Expense Stop

Used in Modified Gross Leases, an expense stop is a limit the landlord agrees to cover for building expenses. If costs go over that cap, you pay the difference.

6. Lease Term Length

This refers to how long your lease lasts — usually 3, 5, or 10 years. Longer leases often get you a better rate, but they’re harder to get out of. Watch for renewal clauses too.

7. Gross Sales (for Percentage Leases)

In Percentage Leases, a portion of your rent is based on your gross sales — the total revenue your business makes before expenses. Make sure you understand how this is calculated and reported.

Understanding these terms upfront helps you ask smarter questions and avoid costly surprises. If anything’s unclear, don’t be afraid to consult a commercial real estate attorney or broker.

Louisville-Specific Lease Considerations

When leasing commercial property in Louisville, there are a few unique factors local businesses should keep in mind — especially when comparing lease types like Full-Service, Triple Net, or Modified Gross.

1. Fewer Consumer Protections

Unlike residential leases, commercial leases in Kentucky — including Louisville — don’t come with built-in protections for tenants. There are no automatic rules around security deposits, notice periods, or habitability. Everything must be spelled out in the contract.

That’s why it’s crucial to:

• Get lease terms in writing
• Clarify what happens if you need to break or modify the lease
• Have a lawyer review any tricky clauses or unusual responsibilities

2. Customization is Common

In Louisville, many landlords are open to customizing lease terms based on your business type or buildout needs. Especially in areas like NuLu, St. Matthews, or the Highlands, property owners may offer flexibility on things like:

• Shared utilities
• Lease term length
• Use of common areas

3. Older Building Stock

Some commercial properties in Louisville — especially in historic areas — may have outdated HVAC systems, roofing, or insulation. This makes building maintenance and repair responsibility crucial to clarify in leases like Triple Net or Absolute NNN.

4. Zoning and Usage

Downtown Louisville and surrounding neighborhoods have varied zoning laws. Before signing, confirm that the lease allows your specific use — whether it’s retail, light industrial, or office space.

Whether you’re opening a coffee shop on Bardstown Road or leasing a warehouse in the Riverport area, understanding Louisville’s local quirks will help you avoid mistakes and build a stronger business foundation.

Legal Advice and Lease Negotiation Tips for Louisville Businesses

Signing a commercial lease isn’t something you want to rush — especially in Louisville, where many leases are customized and offer less tenant protection than residential ones. Whether you’re looking at a Modified Gross Lease, Triple Net Lease, or a more complex structure, getting legal guidance upfront can save you thousands down the road.

A few years ago, I helped a local business owner who nearly signed a lease for a storefront in Clifton without realizing she’d be responsible for structural repairs. The language was buried in the middle of the lease. Thankfully, she had a lawyer look it over just in time. They negotiated to have the landlord cover building maintenance — and that one change saved her over $15,000 during a major roof repair.

Key Legal and Negotiation Tips:

The U.S. Small Business Administration advises that leasing can be a cost-effective option for businesses needing to quickly acquire space or equipment.

• Always consult a commercial real estate attorney. Leases can include tricky terms like escalation clauses, expense stops, or CAM charges that aren’t obvious at first glance.
• Negotiate your pro rata share. Don’t assume shared expenses are fair — confirm what you’re actually using and what you’re being charged for.
• Check the lease term length. Shorter leases offer flexibility, but longer leases may give you leverage to ask for lower base rent or landlord-funded buildouts.
• Ask about exit options. Can you sublease? What happens if you break the lease early? These questions matter if your business changes direction.
• Clarify responsibilities. Know exactly who pays for what: insurance, property taxes, building maintenance, and especially big-ticket items like HVAC and roof repair.

Also, be sure to confirm that your business use aligns with local zoning regulations — especially in Louisville’s historic or mixed-use districts.

When in doubt, ask for clarification in writing. A strong lease isn’t just legal protection — it’s a foundation for healthy landlord-tenant relationships and long-term business success.

Common Mistakes to Avoid When Leasing Commercial Property

Signing a commercial lease can be exciting — but it’s also where many business owners make mistakes that cost them later. From overlooking key terms to underestimating expenses, here are the most common pitfalls to avoid when considering leases like Triple Net, Modified Gross, or Percentage Leases.

1. Not Reading the Fine Print

It’s easy to skim over a 20-page lease, but buried inside could be clauses about escalation, maintenance obligations, or even structural repairs. These can have long-term financial impacts.

2. Ignoring CAM Charges

In leases like NNN or Modified Gross, Common Area Maintenance (CAM) fees can add up fast. If you don’t understand your pro rata share or how the landlord calculates costs, you could end up overpaying.

3. Underestimating Total Costs

Focusing only on base rent is a common trap. Always factor in property taxes, insurance, utilities, and building maintenance — especially in leases where you carry those responsibilities.

4. Choosing the Wrong Lease Type

Every business has different needs. For example:

• A new business may struggle with the variable costs in a Triple Net Lease
• A seasonal shop might be better off with a Percentage Lease
• If predictability matters most, a Full-Service Lease is likely safer

5. Skipping Legal Review

Even experienced entrepreneurs can miss legal loopholes. Always run your lease by a commercial real estate attorney, especially in Louisville, where leases are often customized and favor landlords.

6. Overlooking Exit Clauses

What happens if you need to move or close? A lease without a clear exit strategy, subletting option, or early termination clause can trap you in a costly situation.

Avoiding these mistakes means asking questions, getting expert advice, and understanding every element — from expense stops to lease term lengths. Smart leasing is just as critical as your business location or marketing strategy.

Final Word: Choosing the Right Lease for Long-Term Business Success

Choosing the right commercial lease isn’t just a legal decision — it’s a strategic move that shapes your business’s future. Whether you go with a Full-Service Lease for simplicity, a Triple Net Lease for control, or a Percentage Lease that aligns with your sales, the key is to understand every term, ask the right questions, and make sure the deal fits your goals.

Louisville businesses face unique challenges and opportunities — from local zoning laws to historic buildings and flexible lease structures. Take the time to compare options, consult professionals, and choose a lease that gives you room to grow, not just space to operate.

With the right lease in place, you can focus on what matters most: building your brand, serving your customers, and creating lasting success in the community you call home.

Ready to find the perfect commercial property or negotiate the right lease in Louisville?

At Raphael Collazo Commercial Real Estate, we help investors, business owners, and entrepreneurs make confident, profitable decisions backed by deep market expertise.

Contact us today to schedule a consultation and unlock smarter opportunities across Louisville and beyond.

FAQs About Commercial Leases in Louisville

1. What is the most common type of commercial lease for small businesses?

In Louisville, small businesses often start with a Full-Service Lease or a Modified Gross Lease because they offer more predictable monthly costs and fewer surprise expenses. These leases reduce the burden of handling property taxes, insurance, and building maintenance on your own.

2. Are commercial leases negotiable?

Yes — nearly all commercial lease agreements are negotiable, especially when it comes to CAM charges, pro rata share, lease term length, and maintenance responsibilities. Landlords may be more flexible if you’re signing a long-term lease or improving the space.

3. Can I break my commercial lease early?

That depends on your lease. Some contracts include an early termination clause or allow subletting, but others may require you to pay the remaining rent or a penalty. Always clarify exit options before signing.

4. What expenses should I expect beyond base rent?

This varies by lease type:

• Triple Net Leases (NNN) add property taxes, insurance, and maintenance costs
• Modified Gross Leases split certain expenses with the landlord
• Percentage Leases may include a cut of your gross sales

Always confirm whether utilities, repairs, and common area maintenance (CAM) are included or billed separately.

5. How do I know if a Triple Net Lease is fair?

Evaluate all costs: Is the base rent lower to offset the added expenses? Ask for a breakdown of property taxes, insurance, and maintenance fees from previous years. If possible, compare rates with similar properties in your area or get help from a commercial real estate broker.