If you’re a landlord you may want to consider entering into a Triple Net Lease Property agreement with your tenants, especially if you own a retail property. The target of a Triple Net Lease is to put the property of maintaining and repairing the property on the tenant’s shoulders. In fact the tenant is solely responsible for these repairs and maintenance charges along with taxes, insurance, utilities and any upgrades they wish to make.
The reason this is a great idea for property owners with retail tenants is it allows the tenants to modify the property as they see fit or to fit their particular franchise requirements. And it encourages tenants to keep the property in tip top shape while they’re using the space. The landlord wins by having property that they know will be well cared for and at times even improved and they continue to reap any increases in value that the property accrues over time.
But like all things, there can be some problems with Triple Net Leases. Make sure you’re renting to well trusted and financially viable companies. And keep an eye on their insurance claims. Everyone has heard of the restaurant that isn’t doing well and the mysterious fire that brings in a large insurance settlement. Arson in these situations actually sometimes pays off for the tenants but the property owner is typically left on the short end of things.
Tenants should be careful when agreeing to Triple Net Leases because they’re typically very long term and you want to make sure that the area you’re renting in will be good in the future as well as currently. Like all business transactions, it’s not something that should be taken lightly by either party.