Palm Beach commercial real estate investors negotiate leases regularly. Landlords and tenants have different options when entering into these agreements, one of which is a triple net lease. However, it is important to understand how these contracts work so you can decide if a triple net lease is the right option for your Palm Beach area investment.
What is a Triple Net Lease?
When parties have a triple net lease or NNN, the tenant assumes all responsibility for costs related to the leased space or asset. Additionally, the tenant will pay the rent as stipulated in the lease. The tenant will also pay the net amount for three kinds of costs: real estate taxes on the leased property; building insurance; and maintenance of common areas. Because the tenant is paying these net expenses, which are usually borne by landlords, the rent tends to be lower to offset the difference.
Triple Net Lease for Investors
Triple net leases offer investors benefits such as long-term stability and low risk. These agreements also allow an owner to benefit from leasing property without having to bear the expenses of upkeep, insurance, and taxes. If the property is later sold, an investor could take their capital gain and transfer it to another triple-net-lease property through a 1031 exchange. Triple net leases tend to be long-term, lasting for more than 10 years, and generally include incremental rent increases.
One complication which can arise is when a tenant has higher maintenance costs than anticipated. In this situation, a tenant may try to reduce their rent or even get out of their lease. To circumvent this problem, a landlord may want to use a bondable net lease. This type of triple net lease cannot be terminated until the lease term ends and prohibits making changes to the rental amount.
At Rabideau Klein, we have extensive experience handling commercial real estate investment issues and triple net leases in the Palm Beach area. We have the expertise and local knowledge you need to understand your leasing options. Contact Rabideau Klein to discuss your real estate legal needs.