Are triple net leases explicitly stated or do you read the details?
I'm looking through a few leases and just wondering if leases typically state that they are triple net leases, or if it is assumed through the lease by reading that the tenant will pay for property taxes, insurance and operating expenses?
[{"id": "i9qooaj", "text": "You gotta spell it out and define what the tenant responsibilities are. It protects both parties. You can\u2019t just say \u201ctriple net\u201d and assume everyone has the exact same definition or interpretation.", "replies": [], "depth": 1}, {"id": "i9qox3h", "text": "They\u2019ll say something like net and carefree to the landlord", "replies": [], "depth": 1}, {"id": "i9qqsds", "text": "Spelled out.  NNN can mean many different things as most aren\u2019t literally NNN, especially if not a standalone building.", "replies": [{"id": "i9qwm4c", "text": "When I'm appraising a property and ask the landlord the lease structure, 8/10 they saw triple net. And my next question is always, what expenses do you pay?  Answer: I pay taxes and insurance. Or some variation.  More often than not the lease is not Triple Net. It's just sounds good to them as a buzzword.", "replies": [{"id": "i9qy75c", "text": "What is it that they think that \"triple net\" means? Do they mean they pay the expenses and the tenant reimburses them? That is so needlessly confusing.", "replies": [{"id": "i9qzhta", "text": "They just know triple net is good. So they call their leases triple net trying to talk up their property. Most of these owners would be baffled by reimbursements. I don't know what they think it's supposed to mean but I make sure I always clarify who pays what expenses.", "replies": [{"id": "i9ryfea", "text": "I know you\u2019re legit but aren\u2019t you reading the leases? I wouldn\u2019t ask the owner about the leases for that exact reason. \n\nThe thing that irks me is brokers saying a property is double net because they don\u2019t understand the difference between triple net and absolute net", "replies": [], "depth": 5}], "depth": 4}], "depth": 3}], "depth": 2}], "depth": 1}, {"id": "i9qt1at", "text": "Yes.", "replies": [], "depth": 1}, {"id": "i9qudmz", "text": "Title means nothing. Legally anyway. \n\nGotta review and abstract if you want a summary.", "replies": [], "depth": 1}, {"id": "i9qxud8", "text": "It must be spelt out but often I don't see \"NNN\" in the lease. The language is usually in sections talking about \"Additional Rent\", then it goes on to define what that means for maintenance, insurance, and propety taxes.", "replies": [], "depth": 1}, {"id": "i9re3k6", "text": "A lease will spell out what is being billed back as \"NNN\" and what is being paid directly by tenants. \nThe best way to see if a property is NNN is to ask for a monthly operating statement for 12 months. There will typically be an annual true up of the difference between estimated expenses and actually expenses occured over the course of the year. \n\nA good landlord will regularly reseal and repaint a parking lot and do other regular maintenance items to extend the life of the building that a tenant would definitely not do.\n\nOften times a lender holds back escrows to force these landlords to make these repairs and only reimburse an owner once the repairs have been made.", "replies": [], "depth": 1}, {"id": "i9rrzg6", "text": "I had a guy call me to review a NNN Lease he was purchasing thru another broker. The lease read as a gross lease. So, you need to read ALL of the details to make sure what you are purchasing. On many retail deals for my clients I negotiate a CAP on the NNN increase year over year...so they don't get pounded with a huge increase in case the property exchanges during their lease term (I am in southern CA).", "replies": [{"id": "i9sgjhr", "text": "I am newer to CRE.  Would you mind explaining how you negotiate a cap?  I have not seen that so far.", "replies": [{"id": "i9ss1c0", "text": "I'll add my .2 cents (owner here). Capping expenses is in the tenants best interest, so this is written from that perspective. NNN leases are made up of 3 components - real estate taxes, insurance and common area maintenance costs (CAM). As a tenant, I would ask for a cap of no more than a 3-5% annual increase in CAM costs over the term of my lease. A landlord might come back and say I'll agree to a 5% cap on controllable CAM costs but that is very market-dependent. Non-controllable CAM costs in my market would mean cost of snow/ice removal. Usually we end up agreeing to something around there.", "replies": [{"id": "i9t3d0u", "text": "I can see how that could bite a landlord if there\u2019s a huge upswing in materials or contractor costs.", "replies": [], "depth": 4}], "depth": 3}], "depth": 2}], "depth": 1}, {"id": "i9uu1b0", "text": "I always read leases top to bottom. There are many clauses that are only a few words long that can mess up your valuation.\n\nFor example, some corp lease lawyers sometimes sneak in a clause that they can end the contract at any time with a month's notice, making  it pretty much worthless.", "replies": [], "depth": 1}, {"id": "ib826jb", "text": "Sometimes it\u2019s spelled out.. i.e. \u201cabsolute NNN\u201d but it\u2019s essential to look at the tenant and landlord\u2019s responsibilities.\n\nTrue Absolute NNN = Tenant Responsible for Replacing + Maintaining the Roof + Structure + Parking Lot", "replies": [], "depth": 1}]