Commercial leases are often full of legalese, terms of art and addendums that may make them stretch on for dozens of pages or more. Whether you are renting a space for your business venture or leasing a property you own to a new commercial tenant, you must be certain you understand your risk potential.
Bondable triple net leases are common tools for commercial landlords who want to minimize risk. These leases fall into a larger category of net leases, which require tenants to pay certain expenses.
Single and double net leases
To grasp triple net leases, you first must know what expenses single and double net leases pass onto tenants. With single net leases, tenants must pay the property taxes on each parcel they lease. Double net leases require tenants to pay property taxes and property insurance premiums.
Triple net leases
Sometimes called net-net-net leases, triple net leases hold tenants responsible for virtually all property-related expenses, including taxes, insurance premiums and even maintenance costs. Because tenants have higher costs with triple net leases, rent payments are often lower.
Bondable triple net leases
When tenants sign triple net leases, they may have little or no idea about how additional expenses may affect their operational budgets. If the commercial property becomes too expensive to repair or maintain, tenants may try to cancel the lease. With a bondable triple net lease, tenants cannot get out from under the lease before it expires on its own.
Because most triple net leases are long-term, often running for 10 years, landlords have a keen interest in securing a bondable one. Ultimately, whether you are a commercial landlord or a tenant, it is advisable to understand your rights and obligations before signing a bondable triple net lease.