What is a Triple Net Lease
A triple net lease is one type of commercial leasing agreement. Under a triple net lease agreement, the lessee pays taxes, insurance, and maintenance in addition to the rent. There are pros and cons to a triple net lease for both parties. Individuals and businesses considering a triple net lease should carefully research each lease clause before making a decision.
The triple net lease is sometimes called a true net lease, because the landlord usually has no responsibilities related to building upkeep. This can be an advantage for the tenant in the form of reduced rent. If the landlord does not have to pay for any building expenses, he will not have to artificially raise the rent to cover potentially unknown building expenses. Many commercial landlords favor triple net leasing options. The building is able to generate a high level of income while the tenant maintains it in good condition. The tenant has some of the advantages of ownership, including control over the property, without the large capital investment that a new acquisition represents.A triple net lease can also be risky for a landlord. Occasionally, a tenant may not be able to pay necessary fees, or may overlook critical maintenance issues thus allowing the building to fall into disrepair.
Extra attention must be given to a triple net lease to customize it to the tenant, landlord, and building. The terms of the lease agreement may contain stipulations and restrictions to protect both parties. As an example, the terms of the lease may include a cap on certain building expenses to be paid by the tenant such as property taxes or insurance. If the property taxes or insurance costs rise above a certain amount, the landlord will be responsible for paying the overage.
When considering various lease proposals as a landlord or tenant, the full terms of the lease should always be read and understood before committing. In the case of a triple net lease, be sure that all the terms are clearly written and agreed upon by both parties. Any ambiguities in a lease can result in costly legal expenses down the road. Consulting a professional who specializes in commercial real estate leasing is an excellent idea.
Comments(0)