Harsh economic times are typically rough on businesses and people involved in real estate, but the use of triple net lease allows for some much needed space to breathe when it comes to both renters and owners.
Businesses who are in need of commercial real estate for office, retail, or industrial space are finding themselves looking for the money within their company to put into a piece of property. Unfortunately, they are coming to the realization that their cash is going elsewhere, putting buying a building on the back-burner.
Owners of commercial real estate are looking at the opposite problem; they have space they don’t need, but can’t get rid of it because the market is in a slump and since less new businesses are starting up, less people need to buy commercial property.
A NNN lease helps both parties get out of their bind; giving the business a building to work in, while freeing up their capital to invest in other areas of their business. The landlord also finds a tenant who will pay for almost all property expenses attached to the building.
Unlike conventional lease agreements, where the tenant pays a flat monthly
payment while the landlord covers the costs of property taxes, property insurance, and utilities; a triple net lease requires the tenant to pay property taxes, insurance, and split the cost for any repair or maintenance.
For landlords, the agreement is definitely a money saver since the tenant is paying almost all expenses. A typical triple net lease contract usually includes a clause stating that the tenant pay a percentage of sale profits from their business to the landlord, especially in instances where the space is located in a shopping mall or complex. This allows the landlord to have a financial gain on the property that was otherwise empty; and the financial responsibility, as far as property expenses, of the landlord is almost nonexistent as long as a responsible and financially sound tenants occupy the space.
The pros are not just confined to the landlords, however, companies looking for a NNN lease are doing so, because they want the space for their business, but do not want the weight and permanency of buying a piece of property.
For corporations or businesses needing a building for office or retail space, triple net lease is a way for those companies to use their capital on other important areas of business,instead of being tied down in real estate ownership.
The rent in a triple net lease building is typically less because the landlord can afford to charge a lower monthly payment since the tenants are paying the property’s taxes, insurance, and maintenance.
The tenant in a triple lease agreement can also negotiate the terms of the contract more leniently than in more traditional lease agreements; allowing the tenant to have more control over the
property.
This type of lease agreement allows tenants to have a space they can control and customize for their business, but if at any time they need to expand or downsize, they do not have to worry about selling the property, but can rather leave after their lease is up; freeing them from the property and any attached expenses of taxes, repairs, insurance, etc.
Government entities are also catching on to the freeing nature of using triple lease agreements. Instead of buying several properties to house the various government organizations; a triple net lease allows for use the property however they like, for however long they need, and still have the freedom to leave the building without having to hold onto an empty space that only costs more tax money to maintain.
The growing popularity of this lease agreement for commercial properties is a true testament to its benefits among leasers and tenants. The financial gain of the landlord coupled with the freedom of space and capital for tenants allows for both parties to get what they want and need.
Tommy Greene has worked since 1991 in property investments. He loves all things financial. He recommends (http://www.stanjohnsonco.com) for your property investment needs.
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