What is Triple Net Lease Drafting?
A triple net lease is a commercial agreement between a tenant and a landlord. It specifies that the tenant will pay a lower rental payment but take on responsibility for three operating expenses: property taxes, maintenance costs, and building insurance.
This type of lease has benefits for both the landlord and tenant. For example, it provides landlords with passive income without having to invest much time in managing various obligations, while giving tenants more decision-making authority over the property.
Read the rest of this article to explore triple net leases in more detail, how to draft them, and why you should consider hiring a qualified lawyer for a professional drafting process.
What Core Terms are in a Triple Net Lease?
A triple net lease usually contains the following key elements:
- Parties. The landlord and tenant involved in the triple net lease must be identified by their legal names.
- Premises. The lease should describe the property, such as by listing its physical address and square footage.
- Base rent. This is the monthly rental payment the tenant will pay to the landlord. It’s usually a smaller amount than in a standard lease because the tenant will have to pay for additional costs.
- Property taxes. The tenant covers all real estate taxes.
- Insurance. The tenant will pay insurance premiums for the property to protect it against things like liability and damages.
- Maintenance. The tenant will be responsible for all repairs and common area maintenance (CAM).
- Expenses cap. There should be a limit for how much the tenant’s charges for the three responsibilities can increase per year.
What are Additional Tips for Drafting a Triple Net Lease?
Now that you’ve included key terms in your triple net lease, there is more information to provide for clarity.
Specify Exact Tenant Responsibilities
Never assume that the tenant knows what’s expected of them. You should provide details about their three main expenses, such as by explaining if the tenant will pay property taxes directly or reimburse the landlord.
When it comes to building insurance, specify what insurance coverage is required by the tenant. Similarly, when outlining maintenance and CAM, the lease should state what expectations are required, such as if more than routine repairs are expected of the tenant.
For all expenses, the lease should explain how estimates are calculated.
Consider Rental Escalation
The lease will state the base monthly rental amount that the tenant is responsible for paying. However, you should remember to include an escalation clause to prevent future misunderstandings or hidden costs.
Mention Default and Remedies
If there is a default, such as a lack of rental payment, the lease should specify what will happen. It should first explain what constitutes a default and then mention what remedies can be used by the landlord, such as charging late-payment penalties. These must be aligned with the relevant laws.
Clarify Insurance and Indemnities
A mistake to avoid when drafting a triple net lease is to mention that having insurance is the tenant’s responsibility without clarifying insurance coverage limits, what policy is required, and so on. Mention specific monetary amounts for property and liability insurance.
Include Audit Rights
These should be written into the lease to protect the tenant’s rights to review the landlord’s records so that all net charges which are passed to them from the landlord are accurate. Include provisions for conducting audits, such as time limits and confidentiality clauses to maintain privacy with all information exchanged.
How Does a Lawyer Draft a Triple Net Lease?
Hiring a qualified lawyer to draft a triple net lease is beneficial to ensure all its terms are clear, specific, and fair to both parties. A lawyer will conduct various activities to assist you during the drafting process, such as:
- Including precise definitions of key terms so that there’s no ambiguity in the agreement.
- Allocating responsibility accurately so parties know exactly what is expected of them.
- Stating what the tenant is going to pay, so that there’s no confusion over primary expenses.
- Distinguishing between repairs and replacements or maintenance.
- Defining what constitutes a default and what remedies can be applied.
- Negotiating terms in the agreement with the other party for mutually-favorable arrangements.
- Evaluating future events and risks, such as legal changes or subletting options, to protect your interests.
- Reviewing a triple net lease that you’ve drafted so that it’s clear and specific, giving you the confidence to sign it.
Where to Find a Lawyer for Triple Net Lease Drafting
If you want to hire a qualified lawyer to draft your triple net lease, you don’t have to worry about where to find a reputable, experienced one. Online legal platforms make the process of finding and hiring a lawyer an easy process.
ContractsCounsel is one of the biggest online legal marketplaces that gives you access to a network of vetted lawyers. Since all the lawyers on the platform are experienced in contract drafting and review, they’ll give you peace of mind by providing a professionally-drafted triple net lease.
Here are the steps to follow to request that a lawyer on the platform drafts your agreement:
- Go to the ContractsCounsel marketplace.
- Post your project for free. You should mention a few details to help you find the most suitable lawyer, such as the parties involved in the agreement.
- Wait for lawyer bids. You’ll receive multiple bids from lawyers directly on the platform who can help you draft a triple net lease.
- Review the lawyers’ profiles. The platform provides a range of lawyer information, such as their expertise, credentials, location, and client ratings for previous projects completed on the platform.
- Connect with a lawyer you think is best suited to your requirements and hire them to draft a triple net lease for a flat fee.
