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  • Writer's pictureJohn@LiteHouse

What is a Triple-Net Lease?

Updated: Aug 22, 2023

A triple net lease, also referred to as a net-net-net lease and NNN lease, is a lease where the lessee (a tenant) is responsible for making payments to the lessor(s) on a net-net-net basis. for the following:


  • property taxes;

  • insurance; and

  • property maintenance.


Technically speaking, the landlord owns the building and land, but in addition to the base rent, he passes on to the tenant other operating costs such as building maintenance and repairs.



Common problems to avoid with Triple-Net rentals


Sometimes one tenant neglects their maintenance duties or has shoddy work done to the property to save money during the tenancy. Unfortunately, this can result in expensive problems for the tenant at the end of the lease.


In addition, discrepancies may arise between Landlord and Tenant regarding the condition of the building and its attributes during any term of the lease.


Reduce the risk of triple net and lease real estate investments


The key to minimizing the risks associated with triple net ventures and rental leases is understanding the condition of the building as a whole throughout the term of the lease. This can be done by repeated visual inspection of the property. Visual inspection should be performed by a professional third party inspector. This brings benefits to both the landlord and the tenant.


The landlord may stipulate in the lease that the tenant must have regular inspections of the property and request a copy of the inspection report. The inspection report will provide evidence to the building owner that the tenant is complying with their maintenance obligations. Alternatively, the tenant can book self-inspections to help them understand how the building is doing and help develop a standard maintenance plan. This not only reduces risk, but can save you thousands of dollars in the long run.


What is a Triple-Net Lease Inspection?


A triple-net inspection, also referred to as a net-net-net or NNN inspection, is a type of lease inspection that is performed on a three-net property lease transaction. It should be done for both the landlord and the tenant and can be pre-lease, during the lease or after the lease.


It is more common for this type of inspection to be performed on older properties or long-term leases, but it can also benefit turnkey commercial property leases.


The inspection will be conducted in accordance with the International Standards of Practice for Commercial Property Inspections (ComSOP), which are designed for a transparent inspection process and to provide unbiased information about the property.


Benefits of Triple-Net inspection


Performing regular property inspections is better for your bottom line and ensures that the property is in acceptable condition, so that you can:


  • Reduce operating costs. A commercial property inspector can help you make cost-effective decisions when it comes to developing a preventative maintenance plan and budgeting for potential major expenses.

  • Avoid unexpected inconveniences. Have you ever noticed that unpleasant surprises happen at the most inopportune times? A commercial real estate inspector can help you plan to minimize unwanted situations, such as the AC going out on the hottest day of the summer.

  • Protect yourself from legal claims. A business review report will provide you with the documentation you may need to avoid or resolve legal claims quickly.


Conclusion


Whether you are a landlord or tenant, and whether you are in the pre-lease, mid-lease, or post-lease phase of your commercial property, getting a third-party commercial property inspection is one of the smartest things to do. The final factor in avoiding unwanted expenses is timely maintenance of the property. To ensure you are up-to-date on the property's condition and receive a thorough inspection by a trained and impartial inspector, hire LiteHouse Commercial for your Cincinnati area inspection needs.

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