What Every Commercial Real Estate Landlord Should Know About NNN Leases
From the perspective of an owner, triple net leases are one of the most attractive types of leases as it offers several advantages, most especially from the landlord’s end. If you have a commercial property open for leasing, you should know more about NNN leases, as this can add value to your business and change how you manage your property.
In this article, we will discuss everything you need to know about this type of agreement, from what it is about to its pros and cons. Read on to know if triple net leases will be perfect for your commercial investment property.
What Is an NNN Lease?
First, let’s define what a triple net lease is. As mentioned, a triple net lease, also known as NNN, is a lease agreement between the tenant and the landlord that states that the tenant agrees to pay all the property expenses, including real estate taxes, building insurance, and costs of structural maintenance and repairs, absolving the landlord from costly fees.
What Are the Advantages of Having an NNN Lease?
Some people might think iIf you’re a landlord, you’re the one who will benefit the most from an triple net lease since its advantages mostly favor your side. Here are some of the advantages you can experience once you implement a triple net lease:
- Your Responsibilities Will Be Minimized
The ‘triple net’ refers to the common area maintenance, property taxes, and building insurance. Since these three will now be your tenant’s responsibility, your job as a landlord will become much easier because you don’t have to worry about these things. Your supposed responsibilities will now be taken care of by your tenants, thereby minimizing the tasks you have to do.
- You Don’t Have to Worry About High Vacancy Rates
Most often, properties with a triple net lease come with long-term occupancy. Tenants can have the property for at least 10, 15, or even 20+ years. As a landlord, this is to your advantage because you don’t have to worry about your property being vacant, allowing you to have steady, sure income.
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What Are the Disadvantages of an NNN Lease?
Of course, if there’s an advantage, there’s also a disadvantage. You have to know the cons of a triple net lease so that you can weigh them appropriately. So, here are the disadvantages of having a triple net lease on your property:
- You Cannot Increase the Value of Your Property
Once a tenant agrees with the lease agreement, you cannot change their monthly rate whenever you want to. Triple net leases have fixed rents, and the tenants will pay you every month at the amount you’ve agreed on initially. You have to wait for the tenant to move out before you can increase the rental costs.
- It Will Be Hard to Re-Lease
With an NNN lease, the tenant is free to do anything they want in your property. They can repair, reconstruct, or change the layout according to their liking. Once they move, it’ll be difficult for you to sell it to other tenants because they may not like the current setup. You still have to make necessary adjustments on the property so that it’ll be more presentable for re-leasing.
A triple net lease has its pros and cons. But, if you plan to have it as your lease structure, don’t worry because you can have more pros than cons. The benefits will outweigh the disadvantages, so it’s still a good choice. If you’re unsure what lease structure is suitable for your commercial property, it’s best to seek a real estate attorney’s help.
How Can We Help You?
If you’re interested in either buying, selling, or leasing commercial real estate, you’re in the right place. Saman Saba is a commercial REALTOR® and a real estate attorney whose ultimate goal is to empower real estate sellers, buyers, and lessees to make sound and informed decisions about their most valuable assets. Reach out today to learn more about your options and what you can do regarding your commercial property.
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