QUOTE (pgalas @ Apr 8 2008, 08:08 PM) Does anyone have any experience with "Triple Net Leases"? I am in the midst of co-purchasing the company that I work for and the current bosses own the property and building personally. They would like to continue to use this kind of lease meaning that the company would pay rent and also be responsible for all expenses, repairs, taxes, etc. for the property.
What has been your experience with this type of lease? Good, bad? Any hidden things to look out for?
Thanks!
Paul
triple net is the standard in commercial leases: the tenants pays a base rent PLUS THREE items
a) taxes
b) condo fees
c) utilities
I.e. the rent is net of taxes, condo fees and utilities .. i.e. triple net !
Thus, you have to see the base agreement, which often shows rents and rent increases 10 or 20 years out .. (say 3% annually, or X $s/sq ft this year, X+$2 next year, X+$4 in 2015 ..) plus you should get a copy of the last few years in add`l fees paid, i.e. taxes, condo fees (such as management fees, cleaning, R&M reserve) and utilities (gas, water, electricity).
So, if the landlord decides to add a new roof and new lighting and pave the parking lot .. YOU the tenant pay for it !! Hence it is EXTREMELY important that you understand the implications of a lease signed or assumed !
Be aware that there is NO landlord - tenant act protecting you as a commercial tenant. So if your lease expires in Dec 2008 the landlord can increase rents to ANY amount, thus forcing you into bankruptcy if it takes $500,000 to move out and into a new place due to equipment issues, new installation of stuff you need in your business (so called leasehold improvements such as offices, kitchens, doors, air conditioning, bathrooms ....)
Be also mindful that sometimes you personally have to sign a guarantee for the lease .. so it can hurt you personally too if the business fails or the landlord decides that $30/ sq ft is the right rent and it was $8/sq ft for the last 12 years ..
Have a lawyer review the lease and tell you what is in the lease and its implications ..
