Commercial leases come in several distinct structures, and understanding which one you’re looking at changes what a church actually owes month to month — or collects, if the church is the landlord. A commercial lease is a legally binding agreement between a landlord and a business tenant for the rental of commercial property. Unlike residential leases, commercial leases are used for renting spaces intended for business purposes, including churches, offices, retail stores, warehouses, or industrial facilities.
Commercial leases can vary widely in complexity and terms, depending on the type of property, location, market conditions, and negotiating leverage of the parties involved. It’s essential for both landlords and tenants to carefully review and negotiate the terms of the lease to protect their interests.
Triple Net Lease (NNN): The Most Common Commercial Lease Structure
A triple net lease, often abbreviated NNN, is one of the most common commercial lease structures. The tenant agrees to pay for all operating expenses associated with the property — property taxes, insurance, and maintenance costs — in addition to the base rent. The “triple net” refers to those three expense categories: the tenant pays their proportional share of property taxes, their share of insurance premiums (property and liability), and maintenance costs including repairs, landscaping, utilities, and janitorial service.
Triple net leases are often favored by landlords because they shift a significant portion of the operating expenses and risk to the tenant. For tenants, they can offer a lower base rental rate than other structures, but carry real exposure to unexpected expenses — a major roof repair or a spike in property taxes lands on the tenant, not the landlord. These leases are common for properties leased to national retail chains, pharmacies, and banks, and among the commercial leases a church might encounter as a tenant.
Gross Lease: A Simpler Commercial Lease Structure
A gross lease, sometimes called a full-service lease, is a commercial lease where the landlord is responsible for paying most or all of the property’s operating expenses — typically property taxes, insurance, and maintenance. The tenant pays a single, fixed rental amount, which simplifies financial planning since they don’t have to budget for fluctuating property expenses. Of the commercial leases discussed here, this structure gives a tenant the most predictable monthly cost.
Modified Gross Lease
A modified gross lease is a middle ground between gross and net leases, where the landlord and tenant share certain operating expenses, allowing for more flexibility in how costs are allocated. The tenant pays a base rent amount, and specific operating expenses are divided between the parties as the lease agreement specifies — a tenant might cover their own utilities and janitorial service while the landlord covers property taxes and major repairs.
A modified gross lease offers a balanced approach: tenants get some cost predictability, and landlords share the burden of property expenses rather than carrying all of it. That flexibility makes this one of the more commonly negotiated commercial leases for office and mixed-use space.
Percentage Lease
A percentage lease is a structure where the tenant pays a base rent plus a percentage of their gross sales. This is more common in retail than in a church setting, but it’s a collaborative arrangement that ties rent to business performance — properly structured, it can create a situation where both landlord and tenant are incentivized to maximize the commercial success of the property.
Ground Lease
A ground lease is usually a long-term lease agreement in which a tenant is allowed to develop a piece of property during the lease period. Unless otherwise negotiated, the tenant is responsible for developing and maintaining the property, including constructing buildings and other structures. At the end of the lease term, ownership of the land and all improvements made by the tenant revert to the landowner, unless an extension or renewal is negotiated — a structure worth understanding closely before a church commits to developing on land it doesn’t own.
Which Commercial Leases Come Up Most for Churches
A church encounters commercial leases from both sides. As a tenant — renting worship or office space before a building is acquired, or leasing additional space for programs — a gross or modified gross lease is usually the more predictable, budget-friendly option, since a fixed or near-fixed monthly cost is easier for a congregation to plan around than exposure to fluctuating operating expenses under a triple net structure.
As a landlord — leasing out excess space in a church-owned building to a school, nonprofit, or business tenant — a modified gross or triple net structure often makes more sense for the church, since it shifts some or most of the variable costs of running the building onto the tenant rather than leaving the church to absorb them.
New Protections for Churches Leasing Commercial Space as Tenants
A recent change is worth knowing if your church is the tenant rather than the landlord. Effective January 1, 2025, California SB 1103 added Civil Code § 1950.9 and amended several other Civil Code sections to create new protections for a “qualified commercial tenant” — a category that explicitly includes nonprofit organizations with fewer than 20 employees, alongside microenterprises and small restaurants. Many churches leasing commercial space, especially smaller congregations, fall squarely within that definition.
To claim the protections, the tenant has to give the landlord written notice of its qualified commercial tenant status along with a self-attestation of its employee count, before or at lease execution. Once that notice is given, the law limits how a landlord can pass through “building operating costs” without proper supporting documentation, and extends other tenant protections around notice and lease terms that don’t apply to commercial tenants generally. A church weighing a new commercial lease as a tenant should confirm whether it qualifies and, if so, provide that notice up front — not after a dispute over costs has already started.
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Disclaimer: Every situation is different and particular facts may vary thereby changing or altering a possible course of action or conclusion. The information contained herein is intended to be general in nature as laws vary between federal, state, counties, and municipalities and therefore may not apply to any given matter. This information is not intended to be legal advice or relied upon as a legal opinion, course of action, accounting, tax or other professional service. You should consult the proper legal or professional advisor knowledgeable in the area that pertains to your particular situation.
