A Triple Net Lease Makes Commercial Property Management Easier
by John Daniel Search Engine OptimaizationWhat is a Triple Net Lease (NNN)?
A Triple Net Lease (NNN) is an arrangement between the
tenant and the landlord wherein the tenant is responsible for paying all the
operating expenses in addition to rent. NNN stands for maintenance, insurance
and taxes and is considered as the most advantageous leasing method for
landlords. However, there are risks involved which can be detrimental for the
landlord as well.
The term, ‘Triple Net Lease’ is used loosely and therefore
it is always essential to clarify what the lease includes or excludes in the
leasing contract.
Risks of a Triple Net Lease
Difficulty in the assessing credit worthiness of tenant
It is important to assess the credit worthiness of the
tenant prior to finalising the contract. Single tenant triple net deals usually
involve publicly traded companies and assessing their financial background is
relatively easy as their credit ratings are available in the public domain. On
the other hand, credit analysis of private investments requires more effort and
not assessing them properly might create problems for the landlord as there is
a high risk of bad debt. In such situations it is advisable to avail
professional commercial property
management in New York to ensure
proper credit assessment of tenants.
Tenant might not report damages
The maintenance of the property depends on the tenant.
However, he/she may try to avoid paying maintenance costs by not reporting
damages to the property. Also, the insurance chosen by the tenant might not
cover all damages to the property. The tenant might let the policy lapse by not
paying for insurance. In both these cases, there is a risk of bankruptcy and
the landlord may be left with no choice but to pay off all pending liabilities.
Benefits of a Triple Net Lease
Tenants can be found easily
Since a Triple Net Lease comes with lower rents for the
tenants (as they are also sharing other financial obligations), landlords
usually face no difficulty in finding new tenants. Especially when the building
is new, it is preferable for the tenant because the rent is low and maintenance
expenses too are not that high in the initial phase.
No maintenance worries for landlord
The tenant will be sharing the primary maintenance costs,
insurance and property taxes with the landlord. The landlord need not worry as
the maintenance responsibility rests with the tenant. Also, there is a regular flow
of revenue and the lease term for a commercial property is generally for 10
years or more, thus providing the landlord with ample time to seek new tenants
in case of a premature vacancy.
Besides the above, it is always a good idea to work together
with your management company and examine the commercial property management checklist for leasing services to
mitigate bankruptcy risks and reduce downtime.
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Created on Dec 31st 1969 18:00. Viewed 0 times.