Lease Financing

Lease Financing
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Institutional Affiliation
Lease Financing
A lease is an agreement that states conditions under which one of the parties agrees to rent property or equipment that is owned by the other party. The party renting the property is called the lessee while the owner of the property or equipment is called the lessor (Hallenborg, 2003).
Different Types of Leases
There are four kinds of leases which include gross lease, full-service lease, gross industrial lease and triple net lease. A gross lease is the most basic and simplest type of lease. Under the gross lease agreement, the lessee pays the lessor a specified amount every month (Hallenborg, 2003). A full-service lease is like the gross lease, but escalating costs are passed to the tenant. The lessor gives a rate that covers tax, insurance, utility bills and other expenses. A lessor incorporates an expense limit which when exceeded will be paid by the lessee to cushion himself from escalating costs. The triple net lease is the opposite of the gross lease. The lessor states a base rental fee, but the lessee is obliged to pay for the costs associated with operating the premises (Brigham & Houston, 2012). The lessee caters for tax, insurance and pays for all the utilities (Dillman, 2006).
The first thing that financial managers should consider when leasing property is the terms of the lease and the rent. Evaluating different types of leases will help a manager understand which lease agreement is best for their business based on the size and capacity of the organization.

My preferred lease is a triple net lease.
Advantages and Disadvantages of Triple Net Lease
The main advantage of the Triple Net Lease agreement is that the rent is lower compared to other lease agreements. A premise that is in good conditions and has low maintenance costs is a big advantage to the lessee on a triple net lease agreement (Atlantic Publishing Group, 2009).
The disadvantage of this type of lease is that expenses may fluctuate. Taxes and insurance and utility bills may go up which means operating cost of the business will also go up (Atlantic Publishing Group, 2009).

References
Atlantic Publishing Group. (2009). The encyclopedia of real estate forms & agreements: A complete kit of ready-to-use checklists, worksheets, forms, and contracts with companion CD-ROM. Ocala, Fla: Atlantic Pub. Group.
Brigham, E. F., & Houston, J. F. (2012). Fundamentals of financial management. Cengage Learning.
Dillman, R. J., & American Bar Association. (2006). The lease manual: A practical guide to negotiating office, retail, and industrial leases. Chicago, Ill: Section of Real Property, Probate and Trust Law, ABA.
Hallenborg, M. A., & Stewart, M. (2003). New York landlord’s law book. Berkeley, CA: Nolo.