(NNN) lease offers several advantages in terms of cost predictability and property control, but they also come with significant financial responsibilities.(NNN) lease offers several advantages in terms of cost predictability and property control, but they also come with significant financial responsibilities.

Things Tenants Should Know About Triple-Net (NNN) Commercial Leases

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Triple-Net (NNN) lease offers several advantages in terms of cost predictability and property control, but they also come with significant financial responsibilities. You can make the most of NNN commercial lease and mitigate potential risks by being well-informed and prepared. If you are considering such an arrangement, you should conduct due diligence with help from an experienced real estate attorney.

What is a Triple-Net Commercial Lease?

In NNN commercial leases, the tenant is responsible for paying not only the base rent but also the net costs associated with the property, including property taxes, insurance, and maintenance expenses. These are a few key components of a Triple-Net Lease:

  • Base Rent: The tenant pays a fixed base rent to the landlord, typically on a monthly basis.
  • Property Taxes: The tenant is responsible for paying a portion of the property taxes associated with the leased space.
  • Property Insurance: The tenant is required to cover the cost of insurance for the property.
  • Common Area Maintenance (CAM): This includes expenses for maintaining and repairing common areas of the property, such as parking lots, landscaping, and shared facilities. Tenants are often charged a share of these costs.

Triple-Net Leases are common in commercial real estate, especially for properties like retail stores, office spaces, and industrial facilities. They shift a significant portion of the property’s operating expenses to the tenant, making it important to thoroughly understand the terms and associated costs before entering into such an agreement.

Difference Between Triple-Net Commercial Lease and Gross Commercial Lease

Expense Responsibility

As a tenant, you will be responsible for not only paying the base rent but also the “net” costs, which include property taxes, property insurance, and common area maintenance (CAM) expenses in a NNN lease.

With that said, in a Gross Lease, landlords take on the responsibility for covering all property-related costs, such as property taxes, insurance, and maintenance. You would only need to pay a fixed, all-inclusive rent amount without being directly responsible for these expenses.

Cost Predictability

NNN leases can result in less predictable costs for you. This is because the tenant bears the burden of various property expenses, which may fluctuate from year to year. For example, if property taxes increase, you will need to absorb that additional cost.

Gross leases offer tenants greater cost predictability. Since tenants pay a fixed rent amount that includes all property expenses, they don’t need to be concerned about fluctuations in operating costs. 

Control and Responsibilities

NNN leases will lend you a greater control over property maintenance and operational decisions. Tenants are often more directly involved in property management and maintenance, and can make decisions about repairs, landscaping, and other aspects of property upkeep.

Landlords typically retain more control over property maintenance and management responsibilities in a Gross Lease. They are responsible for coordinating repairs, handling property taxes and insurance, and making decisions about the property’s upkeep.

Benefits of NNN Commercial Lease for Tenants

Triple-Net (NNN) commercial leases can be beneficial for tenants in several ways, depending on your specific business needs and financial circumstances:

  • Cost Transparency: NNN leases often provide transparency in costs. Since tenants are responsible for property expenses like taxes, insurance, and maintenance, you will have a clear understanding of your financial obligations beyond the base rent. 
  • Control Over Property: NNN leases give tenants a higher degree of control over the property’s maintenance and operation. You can make decisions about property upkeep, which can be valuable if your business has specific needs.
  • Lower Base Rent: In many cases, the base rent in NNN leases is lower compared to gross leases, where the landlord covers all expenses.
  • Property-Specific Expenses: NNN leases can be attractive for businesses that want to take on property-specific expenses. For instance, a retail business might want to invest in maintaining the appearance of its storefront.

Things to Consider Before Signing a NNN Commercial Lease

These are a few aspects to consider before signing your lease:

Property Taxes

Property taxes are a significant component of NNN lease expenses. These taxes are assessed by local governments and can vary from year to year based on the assessed property value and changes in local tax rates.

Insurance Premiums

Property insurance costs can differ based on factors such as the type and amount of coverage needed, the property’s location, and insurance market conditions. Changes in insurance premiums can lead to fluctuations in NNN expenses.

Maintenance and Repairs

Common Area Maintenance (CAM) expenses, which include maintenance and repairs for shared areas of the property, can also vary. These costs depend on the condition of the property, the need for repairs or upgrades, and the decisions made by the property owner or property management.

Operational Decisions

In a NNN lease, tenants often have control over property maintenance and operational decisions. This can lead to variability in expenses as tenants may choose to invest in maintenance or upgrades to meet their specific business needs.

To manage the variability in costs, tenants in triple-net leases should:

  • Thoroughly review the lease agreement to understand the specific expense-sharing arrangements.
  • Budget for potential cost fluctuations, especially in the property tax and CAM categories.
  • Communicate and negotiate with the landlord to establish clear expectations for cost increases or property improvements.

Choose a Knowledgeable Real Estate Lawyer to Protect Your Rights

The attorneys at Johannesmeyer & Sawyer, PLLC specialize in all aspects of real estate law, from residential transactions to complex commercial deals. We know the ins and outs of zoning regulations, property taxes, and other local factors that can impact your real estate ventures. To schedule your free consultation, call us at (844) 843-1589 or fill out this online contact form.

Recognizing and preventing fraud in this process is essential to ensure that your wishes are carried out with integrity and that your legacy remains intact.Recognizing and preventing fraud in this process is essential to ensure that your wishes are carried out with integrity and that your legacy remains intact.

How To Recognize Fraud in Estate Planning

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Estate planning is a powerful tool to protect your assets and provide for your loved ones. Recognizing and preventing fraud in this process is essential to ensure that your wishes are carried out with integrity and that your legacy remains intact. An experienced estate planning attorney can help you keep an eye out for warning signs and take the necessary steps to identify and prevent fraud.

Common Types of Estate Frauds

Estate planning fraud refers to deceptive and unlawful practices or schemes aimed at manipulating or misrepresenting documents, assets, or the overall process for fraudulent financial gain.

  • Forgery and Alteration: Fraudsters may forge or alter legal documents, such as wills, trusts, or powers of attorney, to divert assets or benefits to themselves or others not intended by the estate owner.
  • Undue Influence: In cases of undue influence, an individual with power or control over the estate owner exerts pressure or manipulates them into making changes to their estate plan that benefit the influencer. This often happens when the estate owner is vulnerable due to age, illness, or dependency.
  • Fake Professionals: Some individuals falsely represent themselves as estate planning professionals or attorneys, offering their services to draft or revise estate planning documents. They may charge exorbitant fees or manipulate the documents to their advantage.
  • Investment Scams: Estate planning fraud can also involve fraudulent investment schemes or products that claim to provide exceptional returns. These schemes may convince estate owners to invest their assets with the promise of significant financial gains, only for the assets to be misappropriated.
  • Identity Theft: Fraudsters may steal the identity of the estate owner to gain access to their financial accounts, assets, or personal information, ultimately compromising their estate planning.
  • Property Fraud: In some cases, individuals may falsely claim ownership or rights to an estate owner’s property, leading to legal disputes over the assets.
  • Fake Charities: Fraudulent charities or organizations may deceive estate owners into naming them as beneficiaries in their estate planning documents, diverting funds meant for charitable purposes to personal gain.

Tips to Recognize and Prevent Estate Planning Fraud

Know the Law

Before diving into estate planning, educate yourself about the fundamentals. Knowing what a legitimate estate plan should consist of is the first step in recognizing any irregularities.

Verify Professional Credentials

When getting professional help for estate planning, ensure that the individuals or firms you are working with have legitimate and well-documented credentials. You should look for references, client reviews, and certifications to confirm their specialization and reputation.

Scrutinize All Documents

Take a close look at your estate planning documents, such as wills and trusts. You need to remain alert to poorly written or hastily drafted documents, unclear clauses, or any irregular language. Any of these could be a sign that something is amiss.

Avoid High-Pressure Situations

You should be cautious of individuals who try to rush you into making hasty decisions or isolate you from trusted family members and advisors. High-pressure tactics are often employed by fraudsters.

Question Excessive Fees

Keep an eye out for excessive fees or charges related to your estate planning. Unscrupulous advisors may focus on their own financial gains over your best interests.

Family Conflict

An uptick in family disputes or tensions revolving around your estate plan can be a red flag. Such conflicts could indicate irregularities in the planning process.

Insist on Transparency

A trustworthy estate planning professional should be transparent about the process. They should explain the legal documents, answer your questions, and provide clear reasons for their recommendations. If you encounter secrecy or a lack of transparency, it might be a warning sign.

Obtain a Second Opinion

Consider consulting with an independent attorney for a second opinion. A fresh perspective can help you verify the legitimacy of your estate plan and identify potential issues.

Regularly Review Your Estate Plan

Life changes, and so should your estate plan. You should regularly review your plan to make sure that it accurately reflects your current wishes and can prevent unauthorized modifications.

Seasoned Estate Planning Attorneys Can Help Address Fraud

You should always choose an experienced estate planning attorney with a strong professional reputation and a history of ethical practice. Here are a few ways our attorneys at Johannesmeyer & Sawyer can help you:

  • Review and Audit: Our attorneys will review existing estate planning documents for irregularities or signs of fraud. We will conduct an audit to ensure the documents accurately reflect your wishes.
  • Spotting Red Flags: We are skilled in identifying red flags, such as poorly drafted documents, unusual clauses, or instances where undue influence may have been exerted.
  • Second Opinions: If you suspect that your estate plan has been manipulated or compromised, you can get a second opinion from our qualified attorneys to confirm the legitimacy of the plan.
  • Legal Action: If estate planning fraud is suspected, we can help initiate legal proceedings to rectify the situation. This may involve contesting a will, pursuing a claim of undue influence, or other remedies under estate planning and probate laws.
  • Asset Recovery: In cases where assets have been misappropriated, our law firm can assist in asset recovery efforts through legal action.
  • Dispute Resolution: In situations involving family disputes or conflicts related to estate planning fraud, our lawyers can help mediate and resolve issues through negotiation, settlement, or litigation.

Consult with a Skilled and Knowledgeable Estate Planning Attorney Today

If you are concerned about the security of your estate and the financial well-being of your loved ones, it is time to take proactive steps and speak with the estate planning attorneys at Johannesmeyer & Sawyer, PLLC. We are committed to ensuring your assets are distributed according to your wishes and that your loved ones are cared for, even when you are no longer there. Call our toll-free number (844) 843-1589 or reach us online to schedule your free consultation.