USA - NEW JERSEY Law and Practice Contributed by: Steven Fleissig, David Freylikhman, Cory Mitchell Gray and David Jensen, Greenberg Traurig LLP
retail leases, it is a flat percentage of the build - ing’s square footage. Typically, gross leases are seen in shopping cen - tres, office buildings, and other properties where there are multiple tenants in a single building. Conversely, with a net lease, the tenant pays a base rent payment to the landlord and sepa - rately contracts for and/or pays other costs and expenses of the property directly to the service provider or other proper payee. In a triple-net lease, for instance, the tenant would pay a fixed rent to the landlord monthly and separately pay all costs and expenses of the real property such as taxes, insurance, maintenance, and utilities. Ground Leases Ground leases are another type of lease in New Jersey. Typically, the landlord leases only the land to the tenant for a term of 20 or more years and maintains a reversionary interest where, upon expiration of the lease, the land and all improvements will be owned by the landlord. During the term of the ground lease, the tenant is responsible for constructing improvements and maintaining the property. 6.3 Regulation of Rents or Lease Terms New Jersey does not regulate commercial rents. 6.4 Typical Terms of a Lease Leases typically range from five years to 15 years and will often afford the tenant at least one option to renew. The terms vary based on each deal; however, the rent during the renewal term is usually a fixed percentage increase over the rent previously in effect, or based on another calculation such a consumer price index adjust - ment or a similar mechanism used to determine fair market value. Ground leases have much longer terms, typically 25 years or more.
For space leases, the tenant has all repair and maintenance obligations within the premises; the landlord is responsible for maintaining the structural components of the building, the roof, common areas, and the building systems. Typi - cally, leases provide that if the tenant fails to make its required repairs in a timely manner and following notice and opportunity to cure, the landlord has the right to make such repairs and then charge back the incurred costs to the tenant. In a ground lease, it is common for the tenant to be solely responsible for all repairs and all maintenance. Rent is typically paid monthly, although ground lease payments may also be made quarterly or annually. 6.5 Rent Variation Typically, base rent will increase at certain trigger points that are negotiated as part of the eco - nomics of the lease deal (such increase could be every three years, five years, or another interval). The amount of the increase varies but is usu - ally a pre-determined percentage. Escalation charges are usually computed annually, with estimated payments until actual expenses are known and reconciled. In a retail context, the tenant will often be required to pay the landlord a “percentage rent” with a computation commonly done on an annual basis and with payments to be made on an estimated basis until actual sales figures are available. 6.6 Determination of New Rent The amount of the increase is usually known at the time of lease execution and is determined by either a fixed dollar amount, a figure based on cost per square foot, or another fair market valuation calculation or formulation such as the Consumer Price Index.
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