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# Introduction to commercial rents

## 🏢 Introduction to commercial rents

A **commercial lease** is an agreement between an owner and a business (tenant) for the rental of a space for commercial, industrial, or professional purposes.

Unlike a residential lease, it offers **greater contractual freedom**: the parties can define their own conditions (duration, renewal, sharing of expenses, services, etc.).

Commercial leases are generally **more complex**, because their conditions are **clearly more flexible** than those of residential leases. Each agreement can differ according to the nature of the business, the negotiations between the parties, or the structure of the expenses.

This **increased flexibility** does not, however, **mean less rigour — quite the opposite**. Commercial leases require particular attention to detail, because each clause can have an important financial or legal impact for both parties.

### Distinguishing the main elements of a commercial lease

Before scheduling a commercial rent in Plexflow, it is essential to clearly understand the **fundamental components** of a lease.

They serve as the basis for the correct setup of the rent and for the proper allocation of charges.

This structure is often found in **so-called “triple net” or "NET NET NET" leases**, where the **tenant pays not only the base rent**, but also **the majority of the building’s operating costs**.

This type of lease lets the owner transfer a large part of the expenses related to the property (maintenance, insurance, property taxes, etc.) to the tenant, while maintaining a more stable net income.

### 1. The base rent

This is the **agreed fixed amount** between the owner and the tenant for occupancy of the premises, before any additional expense.

This amount can be determined **either as a fixed monthly price**, **or according to a rate per square foot per year** (e.g. $15/sq. ft/year).

A frequent particularity of **commercial leases** is the addition of a **renewal option clause**.

This lets the tenant **extend the duration of the lease** under predetermined conditions, often accompanied by an **indexation clause** or a **price adjustment at renewal**. This flexibility aims to offer long-term stability to the tenant while preserving the owner’s profitability.

In Plexflow, it is possible to set up **several rent periods** (e.g. year 1 at one amount, year 2 at another) to reflect these contractual changes.

👉 Consult this detailed article to learn how to proceed: [How to schedule several rent periods in Plexflow](https://help.plexflow.ca/fr/article/programmer-plusieurs-periodes-de-loyer-dans-plexflow-1av155u/)

⚠️ The amounts must be **determined in advance** for each period.
If the lease provides for **indexation according to an index (e.g. CPI)**, Plexflow **does not automatically calculate** this increase.
You will then have to **manually adjust** the rent amount at the appropriate time.

To avoid forgetting to make the adjustment, it is advisable to **create a reminder directly in the Plexflow calendar** on the scheduled date of the rent review.

👉 Refer to this article to learn how to do this:
[How to add a reminder in the Plexflow calendar](https://help.plexflow.ca/fr/article/indiquer-un-rappel-dans-le-calendrier-plexflow-hcg05t/)

### 2. The applicable taxes (GST and QST)

Commercial rents are generally **subject to federal and provincial sales taxes**, namely **GST (5%)** and **QST (9.975%)**.

These taxes normally apply directly to the **base rent, additional rents, and services**, according to the nature of the fees billed.

To learn more about setting up taxes in Plexflow, consult the following articles:

- [How to add taxes when creating a new lease in Plexflow](https://help.plexflow.ca/fr/article/ajouter-des-taxes-lors-de-la-creation-dun-nouveau-bail-dans-plexflow-cnnlgn/)
- [How to add taxes to a lease that has already started in Plexflow](https://help.plexflow.ca/fr/article/ajouter-des-taxes-sur-un-bail-deja-amorce-dans-plexflow-k5zt8u/)
- [How to add taxes to a service in Plexflow](https://help.plexflow.ca/fr/article/ajouter-des-taxes-sur-un-service-dans-plexflow-16les1z/)

👉 **Other taxes**, such as **municipal or school taxes**, are instead considered **operating expenses** and will be covered in the **Additional rent** section below.

Among these, the **commercial municipal tax,** also called the **commercial property tax** or **non-residential property tax,** is imposed by the municipality according to the **property assessment of the building** and the **tax rate applicable to the commercial sector**.

It is generally added to the **school tax** and is part of the **common charges rebilled to the tenant** under the lease.

### 3. Additional rent

**Additional rent** groups the **operating expenses** and the **common charges** related to the management and maintenance of the building.

You will find in particular:

- **Municipal and school taxes**
- **The non-residential property tax**
- **Maintenance fees** for common areas
- **Snow removal** and **landscaping**
- **Building insurance**
- **Security or janitorial services**

👉 In summary, in a **triple net (NetNetNet) lease**, the tenant assumes **the base rent**, **the operating fees**, and **the property taxes**, while the owner retains **management of the real estate asset**. This model lets the owner stabilize their income, while the tenant takes on most of the actual occupancy costs.

## Setting up additional rent in Plexflow

From a **system setup** point of view, it is important to clearly understand **how the additional rent was determined** in the contract, in order to faithfully reproduce the payment structure.

Two main options are available to you:

| Option | When to use it | What to check |
| --- | --- | --- |
| **Option 1: Fixed monthly amount** | When the lease provides for a stable amount added to the base rent. | Create a distinct service per item. Apply GST/QST if taxable. |
| **Option 2: One-time amount** | When a charge must be billed only once on a given date. | Choose a date different from the regular rent. Enter the amount if taxes apply. |

**Option 1 – Fixed monthly amounts**

Used when the lease provides for a stable amount each month to cover operating expenses (e.g. $100/month + taxes for parking).

👉 You then simply add this amount in the **Services** section of Plexflow, so that it is automatically included in each billing period.

👉 For more details, consult the article: [How to add additional rent as a fixed amount in Plexflow](https://help.plexflow.ca/fr/article/ajouter-un-loyer-additionnel-selon-un-montant-fixe-dans-plexflow-5h1zdo/)

**Option 2 – One-time amounts at specific times**

Used when certain expenses are billed at specific periods (e.g. annual allocation of municipal taxes or a one-time adjustment of maintenance fees).

👉 In that case, you can **manually add a collection or a unique invoice** on the desired date.

👉 For the detailed information concerning this procedure, consult the article “[Commercial leases - How to add a one-time amount in Plexflow](https://help.plexflow.ca/fr/article/baux-commerciaux-ajouter-un-montant-ponctuel-dans-plexflow-15uoo8q/)”.

This article’s goal is to explain **how to set up a commercial rent in Plexflow**, from a **technical and practical** point of view.

It aims to support users in **scheduling the lease inside the software**, by faithfully reproducing the parameters agreed between the owner and the tenant.

To clearly understand how the system works, we cover certain **essential components of commercial leases**, such as the **base rent**, the **applicable taxes**, or the **operating expenses**.

These elements are presented **only as examples**, in order to illustrate the setup logic in Plexflow.

The content of this article has a **strictly technical** scope.

It constitutes **neither a guide for drafting a commercial lease**, nor a **legal interpretation** of the clauses of a contract.

For the **drafting of the lease itself** or for any legal question, it is recommended to **consult a licensed professional** (lawyer, notary, or legal advisor specialized in commercial law).