Triple Net Leases - Are you Paying attention
There are many benefits to owning a single, double or triple net (“NNN”) leases. One of the most significant benefits is passing on the burden of operating the property to the tenant. In most NNN Leases the tenant makes the repairs, pays the rates, deals with the issues on-site etc… Because so many responsibilities have been shifted to the tenant, there is a temptation for the property owner to merely wait for the check each month and leave the headaches to the tenant. We believe that this approach is a mistake because there are many issues that need to be reviewed on a regular basis to protect your investment. Below, we have identified some issues for the owner of a property with a NNN lease to consider, but sometimes fail to do so with dire consequences:
• How are you confirming that the tenant is paying its NNN obligations, such as rates, water, electricity etc so that a large bill is not due the end of the lease? Regardless of the terms of the NNN lease, the Municipality will look to the owner to pay any and all taxes owed.
• How are you confirming that the tenant is making the necessary repairs to the property (such as not using duct tape to fix the pipes) and not causing damage to the space that can eventually require a structural repair long after the tenant is no longer on the property?
• How are you confirming that the tenant is maintaining proper and sufficient insurance on your property, has named you as an insured to that policy, that the policy has not been cancelled, and has indemnified you?
• Do you have the proper insurance to cover your obligations, such as structural repairs, to cover any liability in the event of an accident?
• How are you confirming that the tenant is not performing work on your property without your permission or proper permits?
• How are you confirming that the tenant or others are not engaging in illegal or questionable activities on your property?
• How are you confirming that the tenant is performing the necessary upkeep on the property?
As the above demonstrates, the owner of a property with a NNN lease cannot just sit back and hope for the best.
For more information on purchasing, renting or investing in commercial and industrial property in Cape Town, please contact Robert Ryll | Cell Number: 082 374 2662 | Landline: 021 552 4100 or Email: firstname.lastname@example.org
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