If you’re a landlord looking to lease out your property using a triple net lease, you need to know what clauses are crucial to include in the agreement. Otherwise, you could put yourself or your tenants in a disadvantageous position.
If the clauses in the agreement aren’t properly laid out, you might, for example, not be able to hold your tenants liable when they’re late for a payment. You could also be held liable for something you had assumed was the tenant’s responsibility but was not accounted for in the agreement.
Avoid this by reading on and learning about the most important clauses to include in a NNN property lease agreement.
Why Use a Triple Net Lease?
In a triple net lease, tenants may pay for a portion of, or all of, the taxes, insurance, and maintenance costs of a property. Landlords get a reliable source of income with few overhead costs and minimal responsibilities, while tenants can get more control over the property and lower rent. It’s a win-win situation for both parties.
What Clauses Should Be Included?
A lease agreement is a legally binding contract outlining the terms you agree to lease your property to a tenant. The clauses in the contract are important for laying out the conditions and are essential to protect both parties if one side fails to comply with the terms.
There are many various clauses in a triple net lease. As with any commercial lease agreement, it wouldn’t be strange for the contract to be at least several pages long. Listed below are some of the most important ones.
Use of Premises
The clause identifies the property under lease. This should include an address, a description of the boundaries, and a plot plan. It also specifies for what purposes the space will be used. For example, this clause could state that the premises must be used solely as a family entertainment center or restaurant.
This clause holds tenants responsible for taking care of the property. They’ll be liable for maintaining a safe, clean environment for themselves and those they allow entry to, like their customers.
In a triple net lease, the term clause specifies the lease’s duration, its commencement date, and expiration date. Renewal options are also included sometimes. The longer the lease, the more you’re able to justify investing in tenant improvements, as you’ll have more time to make up the difference. You’ll then have to spend less on improvements for new tenants.
The rent clause states that the tenants are liable for paying the full rent amount for the use of the property. This clause can also include automatic rent increase mechanisms and late payment. It’s essential to ensure you’re profiting from leasing your property.
Pro-Rata Operating Costs
In addition to rent, a dedicated clause is used to specify that the tenant is responsible for paying a portion of the building’s property taxes, insurance, and maintenance costs. Typically, landlords calculate payments based on annual expenses and the building’s total rental square footage.
CAM (Common Area Maintenance) Expenses
This clause lists the operating and maintenance expenses and restrictions such as Wi-Fi, utilities, security, snow removal, pest control, management fees, and so on. The items that should be included in the list depend on the type of property you’re leasing and for what purposes it’s being leased.
This clause can hold tenants liable for costs associated with expenses concerning HVAC units, reconstruction, building improvements, plants, and other physical assets. It ensures you have minimal liability for the property’s condition during the lease.
All lease agreements end with an acknowledgment clause stating that the parties have read and understood the agreement. With the signatures from the parties’ representatives, the lease becomes legally binding.
Ensure a Fair Deal
Lease requirements differ between industries and property types. Brisky Net Lease has decades of experience and will help you understand them. We’ll ensure all lease agreements you sign are fair and align with your best interests.