Before leasing any property, it is a good idea to read all the terms and conditions of the lease agreement. It includes any legal documents included in the net lease properties because these will be important in your efforts to protect your interests.
Legal documentation can include items such as insurance certificates, absolute nnn lease, indemnification clauses, personal guaranties, easements, or legal covenants that may limit or restrict your use of the net leased property.
Make sure you fully understand all the terms and conditions that apply to the property before signing any documentation.
Net lease properties are real estate leases. The tenant pays rent for leasing a specific space within a building and other expenses such as taxes, insurance, maintenance, utilities, and property management.
What are the Different Types of Net Leases?
There are three main types of net leases; gross lease, modified gross lease (also referred to as a full service), and triple net (NNN) lease.
- Gross leases typically contain no specific tenant obligations after the tenant pays the initial rental.
- A modified gross lease typically contains additional leasing obligations for the tenant in addition to rent, such as property taxes. For this reason, it is sometimes referred to as a full-service net lease.
- Triple net leases are different from most other leases since they contain all the aspects found in either the gross or modified gross type leases. Yet, it is different because the tenant is liable for all expenses of operating and maintaining the building, such as property taxes, utilities, and insurance.
What are some Gross Lease Property Expenses?
Typical gross lease properties usually include property taxes, insurance premiums, maintenance and repairs (tenant pays a prorated amount), and utilities (tenant pays total amount).
What are some Expenses Included in Triple Net Lease Properties?
A Triple net lease also contains all expenses for operating and maintaining the building, such as property taxes, insurance premiums, maintenance and repairs (tenant pays a prorated amount), and utilities.
Is a net lease right for you?
Net leases have been associated with large companies due to their stable income since it is usually in place for 15 years or more. These properties are ideal for companies that do not want to deal with issues such as maintenance and repairs.
What are some Gross Lease Advantages?
Gross lease properties can sometimes be a favorable option since these leases do not require the tenant to make any further investments in the net leased property; they only need to pay rent.
Is it possible to break a net lease?
Breaking a net lease is difficult as it requires extensive legal documentation and approval from the landlord. It can take several months, and it is not recommended to break a net lease without legal help since it may lead to problems such as eviction.
In summary, net leases are not for everyone but can be advantageous to those with solid business ideas since you take on little risk by signing the lease contract. You will want to consult your financial adviser or legal counsel before entering into a net lease agreement, as it is a binding contract that cannot be broken without legal ramifications.