Leasing is a process in which a person who owns a property permits the lessee to use it. Here, we use two terms. A Lessor and a Lessee. A lessee is a person who demands real estate for their use. And the person from which one demands real estate is called Lessor. Many countries have different laws for leasing and renting properties, and the same goes for Pakistan. Before going into the details of laws and paperwork, it’s good to have an understanding between lease and rent. The only difference between lease and rent is related to time. For rent, the landlord takes rental every 30 days. While, for lease, we use a contract that pays an amount in a lump sum for using the property. Aborting the contract may cause losses to both parties. The time in the lease may vary from 3 months to one year. And it can be more than one year, depending on the lessee’s decision. Whatever the decision might be, the lease amount must be paid in full. However, in Pakistan, the concept of leasing a property is not prevalent as in other countries. Leasing is a global business with a track record of exponential growth. It is becoming a new norm in society because there are a lot of success stories about it. Let’s dive deep into the abyss to find out how to get a lease in Pakistan on your property in Karachi or other cities.
Types of LeasesIf you’re serious about the lease, you’ve to have a sound understanding of the types of lease. Otherwise, it may confuse you and prevent you from making sound decisions.
1. Full-Service Lease (Gross Lease)In a full-service lease, the lessee – who demands real estate, needs to pay only one bill, that is their tenant fees. Sometimes the rental is vast as the lessee is paying the only bill. But, they also get relief from other expenses, such as property taxes, insurance, and security deposits. Sometimes the owner uplifts the expense happening on his side after a year. And put those expenses on tenants instead. This practice is common in most areas, but people aren’t aware of them. Therefore, the lessee has to rigorously examine the property’s guidelines before trying to put their hands on it.
2. Net LeaseIn a net lease, the tenants are bound to pay some part of their property expenses. These expenses include living expenses, property taxes, and further other expenses passed by the owner. A net lease is a parent type of three leases: single net, double net, and triple net lease. When using a net lease, you have to carefully consider the terms because, in some places, owners ask price relative to per acre or foot.
3. Single (n), Double (nn), and Triple Net (nnn) LeasesIn a ‘single net’ lease, the tenants pay for almost everything except maintenance and insurance costs. The stipulates include rent, security deposits, and property taxes. The single net lease has an advantage over other leases because tenants pay slightly lower than other leases. In a ‘double net’ lease, people pay rent and other additional expenses except for building maintenance. Usually, the double net lessees often pay less in rent because they have other additional expenses to cover. The rent hike cost has been subsidized for’ triple net’ lessees because they have to pay for rent and other expenses running the property. They also have to pay less in rent to cover other expenses. Sometimes, ‘absolute lease’ and ‘triple net lease’ can be used interchangeably, but their original purpose differs. All three leases are the subcategories of net leases.
4. Absolute ‘nnn’ LeasePeople rarely use this kind of lease because there is a risk involved. In this lease, renters pay almost all the costs enabling them to a sole property owner. The risk strikes when, under some catastrophic circumstances, a building or part of real estate is destroyed. No one is there to help build that property again for the owner. Therefore, during negotiations, people don’t consider absolute nnn lease as a choice.
5. Modified Gross (Net) LeaseThe option is available for someone who disagrees with the available leases and conditions. Therefore, the tenants or owners need to come up with a customized lease option. Let’s say if you’re getting a lease on a property on lease in Pakistan, and you both aren’t agreed upon some terms, then MGN is there to help you. You and the owner have to mutually agree upon some facts to kick start the effect of the modified gross lease. You can negotiate between rent prices and utility bills while the owner can do something about maintenance costs and other expenses. These are all for the types of leases in Pakistan.
In ConclusionHaving read about the kind of leases, you might have gained some considerable knowledge about leases and how it works. If you’re looking to get some help with other questions about properties and real estate, RAAS – Smart Property Solution can help you with it.
Questions or concerns about real estate investments in Karachi? Connect with RAAS expert for smart future investments.