Modified gross lease
| Modified gross lease |
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| See also |
Modified gross lease is an agreement on real estate market where not only base rent is included, but also additional costs related to property maintenance, e.g.:
- taxes,
- insurance,
- heating.
If the tenant leases only part of property (e.g. one office), he/she pays part of those costs related to percent of property he/she uses.
Why modified gross lease?
Regular gross lease includes only base rent price. The landlord pays all the additional costs (however they are calculated into base price). Net lease calculates base rent price without all the additional costs, and those costs are covered by tenant. Modified gross lease is a mix of those two: only some costs can be included or tenant covers only some percentage of those costs.
Modified gross lease is popular in buildings where multiple tenants lease offices or apartments and it is difficult to precisely calculate costs of e.g. heating per tenant.
Taxes
This is one of the local government taxes that feeds the commune's budget. The tax authority competent in matters of this tax is the commune head (mayor, president of the city). The following real estate or construction objects are subject to tax:
- land,
- buildings or parts thereof,
- buildings or their parts related to running a business.
General characteristics of property tax.
Real estate tax is one of the largest sources of own revenue for the commune budget. Due to its wide characteristics, it can be assigned to various types of taxes:
- Income tax - it charges income not taking into account the costs of obtaining it. The actual possession of real estate generating alleged income is taxed.
- Consumption tax - the taxpayer uses property resources of recreational, recreational, etc. value. Income is taxed during his consumption expenditure. property tax - encumbered with the possession of property. The source of payment of tax is property in a static approach, i.e. not subject to changes in nominal or real terms. It is taxed, for example, to use your own property for personal purposes or to have a construction site as a form of capital investment.
The taxpayers of real estate tax are natural persons, legal persons, organizational units, including companies without legal personality, being:
- owners of real estate or construction objects,
- self-owned holders of real estate or construction objects,
- perpetual usufruct of land,
- owners of real estate or parts thereof or building objects or their parts, owned by the State Treasury or a local government unit. If the subject of taxation is in its own possession, the tax obligation in the scope of property tax is on the holder of an autonomous one [1].
Insurance
Property insurance - covers all property components, i.e. within the meaning of civil law, one of the types of property including land properties, building properties and parts of buildings. The central point of this insurance is the risk of fire, flooding, flooding and theft. A comparative essence of every property insurance
What is included in the housing insurance?
Housing insurance can include:
- equipment insurance against random events, equipment insurance against burglary or robbery,
- insurance of the apartment / house walls (ie the construction of the building itself),
- liability insurance in private life for damage caused to third parties in connection with the exercise of private life activities in one of two variants to choose from (Standard or Premium),
- assistance insurance (assistance after damage at the place of insurance) [2].
Heating
The heat supplier (heating network operator) charges the building manager for the heat supplied, which consists of two groups of costs:
- fixed costs, independent of the amount of heat actually collected, resulting from the contracted power and fixed charges for the heat supplier.
- variable costs, resulting from the amount of heat actually taken for heating the building and the costs of transporting it to the building.
Heat costs indicated on the invoice of the heat supplier, independent of consumption, the building manager divides the premises among users, using their usable floor space as a criterion.
These costs are added to the variable costs, determined by the building manager using the percentage indicator, which is the cost of heating the space used jointly by all users of premises in a given building, such as corridors, staircases, technical rooms.
The sum of fixed costs, resulting from the invoices of the supplier and a part of variable costs, intended to heat the common parts, is the costs independent of consumption in premises in a given building [3].
References
- Chau, K. W., & Wong, S. K. (2016). Information asymmetry and the rent and vacancy rate dynamics in the office market. The Journal of Real Estate Finance and Economics, 53(2), 162-183.
- Itard L., Santin O., Visscher H. (2009) The effect of occupancy and building characteristics on energy use for space and water heating in Dutch residential stock „Energy and Buildings” 41.
- Lang K., Tianlun J. (2000) Property Taxes and Property Values: Evidence from Proposittion 2½ „Department of Economics Boston University, Massachusetts Financial Services” 02215.
- Zou H. (2010) Hedging Affecting Firm Value via Financing and Investment: Evidence from Property Insurance Use „City University of Hong Kong” v. 39 n. 3.
Footnotes
Author: Agata Janusz
