When leasing commercial real estate, there is a popular property type known as the triple n or 3N meaning 3 net terms given to tenants with high credit standing. In this arrangement, the tenant is responsible to pay the leased real estate taxes or tax net, insurance, and all property maintenance.
Commercial property owners should look at these triple net deals as the perfect investment since the management responsibility if given to the tenant and so this is the best place to put their extra money without headaches and with better profitability. Since the tenants they would get would be only those who qualify, they are assured of a long-term lease. With this type of lease, the property owner is assured of a stable net income and he does not need to worry about taxes and insurance of their leased real estate investment.
For a tenant, it involves higher risk because this setting seems to favor the property owner more than the tenant. Nevertheless, this is not the case for retail and some industrial rentals because of various reasons which I hope to cite.
One reason is that retail and industrial rentals have more control of the property, so if your need plumbing system installation or roof repairs, you don’t have to ask the property owner for approval. The tenants are able to hire contractors or anyone who can install or repair various fixtures which are necessary for their present needs. But these have qualifications like you don’t hire contractors that use substandard roofing materials or anything critical to its long lifespan. Tenants usually have the right to make small changes to the property, and operate independent of the property owner’s control. But the agreement that was signed prior to occupancy is moderated by the lease.
Another benefit one gets from a triple net lease is the low rate of rental compared to gross rents. Since they are responsible for operational expenses, the low rents are able to sort of balance the equation which is typical of retail and industrial rentals.
The Triple Net Gateway for tenants will require a kind of quality risk management after it has identified the risk factors that is involved prior to signing the contract which means that one must be cautious in negotiating caps. This includes maximum amount that you are liable for over the basic rent amount each year. You have to remember your liability for the extra expenses and this does not depend on whether your business makes good or not. When it comes to who benefits more with tripe net lease, it is safe to say that both property owner and tenant benefit from it equally.