Hello, we are taking over an existing commercial property with two units (one with an existing tenant). The owner seems to prefer to have a triple net lease agreement in place (base rent plus all operating costs). Is there any special language I need to include in this lease to cover this type of thing?
March 24, 2025
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The short answer is to probably use a template like this one - https://eforms.com/rental/commercial/
The long answer is to add the clauses yourself in the following manner:
First, ensure that the lease agreement explicitly states that it is a triple-net lease. This can be done by including a clause that specifies the tenant’s responsibility for all operating costs, including property taxes, insurance, and maintenance. The lease should detail each of these expenses and how they will be calculated and billed. For example, the lease might state that property taxes will be billed annually based on the actual tax assessment, while insurance premiums and maintenance costs will be billed monthly or quarterly based on actual expenses incurred.
Second, the lease should include provisions for common area maintenance (CAM) charges. These charges cover the costs of maintaining shared spaces, such as parking lots, landscaping, and building exteriors. The lease should specify which CAM expenses the tenant is responsible for and how these costs will be allocated among tenants if there are multiple units. It’s important to be as detailed as possible to avoid disputes later on. For instance, the lease might outline that the tenant is responsible for a proportionate share of CAM expenses based on the square footage of their unit relative to the total rentable space.
Third, regarding your role as the property manager, the lease agreement should include a management fee clause. This clause should specify the compensation you will receive for managing the property, which is typically a percentage of the gross rental income. Additionally, the lease should outline your responsibilities as the property manager, such as collecting rent, coordinating maintenance and repairs, and handling tenant disputes. Including a detailed description of your duties will help ensure that both you and the property owner have a clear understanding of your role and compensation.
Fourth, it’s important to include a clause that addresses the process for handling maintenance and repair costs. This clause should specify which types of maintenance and repairs are the tenant’s responsibility and which are the landlord’s. For example, the tenant might be responsible for routine maintenance and minor repairs, while the landlord is responsible for major structural repairs. The lease should also outline the procedure for reporting and addressing maintenance issues, including any required approvals and timelines for completing repairs.
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Hello, we are taking over an existing commercial property with two units (one with an existing tenant). The owner seems to prefer to have a triple net lease agreement in place (base rent plus all operating costs). Is there any special language I need to include in this lease to cover this type of thing?
I understand the importance of ensuring the lease agreement covers all operating costs. Have you discussed with the owner which specific operating costs will be included in the triple net lease?
Rent, maintenance, taxes, and fees.
Are there any particular concerns or specific details you would like to address in the lease agreement for the commercial property takeover?
I want to make sure we have the correct provisions in our management agreement with the owner to manage the units, and that we are able to recover compensation for maintenance we project manage or conduct on the property. I am not sure what particular provisions would be applicable to such a tenant lease agreement with respect to our being the property manager and our agreement with the owner.
Is there anything else the lawyer should know before I connect you? Rest assured they’ll be able to help with your management agreement provisions.
No.
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I’m sorry to hear about the complexities you’re facing with your commercial property lease. When drafting a triple net (NNN) lease agreement, it’s crucial to include specific language that clearly outlines the responsibilities of both the landlord and the tenant. A triple net lease typically requires the tenant to pay for property taxes, insurance, and maintenance costs in addition to the base rent. This arrangement can benefit both parties by providing the landlord with a stable income and the tenant with potentially lower base rent.
The short answer is to probably use a template like this one - https://eforms.com/rental/commercial/
The long answer is to add the clauses yourself in the following manner:
First, ensure that the lease agreement explicitly states that it is a triple-net lease. This can be done by including a clause that specifies the tenant’s responsibility for all operating costs, including property taxes, insurance, and maintenance. The lease should detail each of these expenses and how they will be calculated and billed. For example, the lease might state that property taxes will be billed annually based on the actual tax assessment, while insurance premiums and maintenance costs will be billed monthly or quarterly based on actual expenses incurred.
Second, the lease should include provisions for common area maintenance (CAM) charges. These charges cover the costs of maintaining shared spaces, such as parking lots, landscaping, and building exteriors. The lease should specify which CAM expenses the tenant is responsible for and how these costs will be allocated among tenants if there are multiple units. It’s important to be as detailed as possible to avoid disputes later on. For instance, the lease might outline that the tenant is responsible for a proportionate share of CAM expenses based on the square footage of their unit relative to the total rentable space.
Third, regarding your role as the property manager, the lease agreement should include a management fee clause. This clause should specify the compensation you will receive for managing the property, which is typically a percentage of the gross rental income. Additionally, the lease should outline your responsibilities as the property manager, such as collecting rent, coordinating maintenance and repairs, and handling tenant disputes. Including a detailed description of your duties will help ensure that both you and the property owner have a clear understanding of your role and compensation.
Fourth, it’s important to include a clause that addresses the process for handling maintenance and repair costs. This clause should specify which types of maintenance and repairs are the tenant’s responsibility and which are the landlord’s. For example, the tenant might be responsible for routine maintenance and minor repairs, while the landlord is responsible for major structural repairs. The lease should also outline the procedure for reporting and addressing maintenance issues, including any required approvals and timelines for completing repairs.
Yes… I have maintenance fees covered… but as it applies to the NNN aspect, is there any type of boilerplate statement or example you can share?
Thanks.
