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What is an Addendum to a Lease?
An addendum to a lease is a separate legal agreement added by the landlord or tenant to the original lease agreement between the landlord and a tenant. Lease addenda are used to provide additional information that the original lease does not cover. Examples of addendums may include pet addendum, smoking addendum, and lead paint disclosures. Some addenda, such as the lead paint disclosure, are required by law to be added to lease agreements.
Addendums to lease agreements can include both residential lease agreements and commercial lease agreements. The addendum should be signed by both the landlord and the tenant.
How to Write an Addendum to a Lease
An addendum to a lease can help address unique issues specific to a property. If you choose to create your own addendum, there are some basic rules you can follow.
- An Addendum must include basic elements of any lease agreement between a landlord and tenant. A lease agreement is a legal contract between a user and an owner for the use on asset, generally a real estate property. An addendum can be used for any kind of lease, including a land lease, commercial lease, residential real estate lease, office space lease, etc.
- In an addendum to a lease, you will need to add the dates, names and addresses of all parties involved in the original lease agreement.
- Each addendum should contain a specific and separate issue.
- Each title should contain “addendum” after the issue being discussed.
- An addendum is generally 1-2 pages long.
- All addenda should to be signed by both parties. While it may not be a requirement to for both parties to sign to be legally enforceable, it is always recommended.
Does an addendum supersede a lease?
The addendum is a part of the lease agreement. Therefore, it does not stand on its own. However, the addendum should make references to the lease, contain the same date and name of parties as in the original lease agreement. If the addendum states that its addition will modify an existing clause in the original lease agreement, then one can make a case for it superseding the original lease contract. The addendum should clearly state if it adds to or modifies any part of the original lease agreement.
Here an article on an addendum to a lease.
Types of Commercial Leases
There are multiple types of leases to consider, but we will highlight three types of commercial leases below:
- Single Net Lease: A single net lease, or net lease, only requires the tenant to pay property taxes in addition to rent. In a single net lease, the tenant bears the minimal amount of risk. Expenses other than property tax and rent, such as insurance, maintenance, utilities and repairs are paid by the landlord. The landlord also is responsible for any repairs or maintenance issues in the property during the lease. Tenants end up paying slightly less rent under a single net lease due to the added property tax cost.
- Double Net Lease: A double net lease requires the tenant to pay property taxes as well as insurance premiums in addition to rent. In a double net lease, the landlord bears all maintenance costs. Tenants end up paying a lower base rent because of additional expenses involved. This type of lease is generally used in large commercial rental spaces where tenants might rent areas with varying square footage. The landlord assigns taxes and insurance costs to tenants proportionally, depending on the size of square footage being leased per tenant.
- Triple Net Lease: A triple net lease, or a NNN lease, requires the tenant to pay property taxes, rent, insurance premiums as well as maintenance costs. A triple net lease is the least risky for any landlord. The tenant is also responsible for any costs, such as structural maintenance and repairs. Therefore, when maintenance costs are high, tenants can try to get out of their leases. As a result, often under tripe net leases, landlords attempt to use a bondable net lease–which cannot be terminated before its expiration. Triple net leases have their own pros and cons.
Image via Pexels by Max Vakhtbovych
Pros and Cons of Triple Net Leases
A triple net lease provides the most security for a landlord. This can have its own set of pros:
- Long term occupancy: Triple net lease agreements generally offer long-term occupancy thus providing security for the landlords.
- Low-risk investment: Since the tenant is responsible for all costs associated with the property, a triple net lease agreement is a low-risk investment for the landlord or investor.
- Consistent Income Stream: Long-term occupancy structure of a triple lease agreement also makes it a consistent income stream for the landlord.
- Build Equity: The low-risk nature of a triple net lease agreement makes it a good option to be added to investment portfolios to build equity.
- Reduced landlord duties: A triple net lease reduces the landlord’s responsibilities as the tenant is responsible for most costs and maintenance issues associated with the property.
- Tax benefits: Since tenants pay property taxes under a triple net lease, they can use these expenses as their business expenses to get tax benefits.
This doesn’t mean that tripe net leases do not pose any problems to landlords. Here are some cons of triple net leases:
- Earning caps: Since triple net lease agreements require long term commitment, they generally lock in the rent value with no option to increase rent if property value increases. It is worth noting that the terms for rent increases can be negotiated between the parties and included in the agreement, however.
- Vacancy risks and rollover costs: There is a risk of default by the tenant and in that case investors would incur losses and will have to cover all property costs.
- Assuming property expenses: For the tenants, the responsibility to pay all property costs and maintenance costs can be a financial burden.
- Tax liabilities: Tenants responsible for property taxes also become responsible for associated liabilities such as late or incorrect tax remittance.
Here more on different types of leases.
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Meet some of our Addendum to Lease Lawyers
Matt B.
Matt practices law in the areas of commercial finance, corporate law and residential and commerical real estate (with a particular emphasis on retail shopping centers and office buildings). He has extensive experience in negotiating and structuring complex commercial loan, asset acquisition, asset disposition and real estate transactions. Matt additionally works on various general matters for clients such as forming LLCs and corporations, preparing various LLC and corporation documents and drafting and reviewing various types of contracts and agreements for clients and providing advice regarding same. Matt provides clients with extensive and timely communication on their matters and ensures that his clients are well represented and highly satisfied with their legal representation and the work product provided. Matt offers all potential clients a free initial consultation to discuss their legal matters prior to engaging his firm to represent them. Prior to opening his law firm Matt worked for many years in the New York City office of a large international law firm where he counseled large multi-national businesses, financial institutions, investment groups and individuals on highly sophisticated business, financial and real estate transactions. Matt provides his clients with diligent legal representation on their matters with a very personal approach.
Curt B.
Curt Brown has experience advising clients on a variety of franchising, business litigation, transactional, and securities law matters. Mr. Brown's accolades include: - Super Lawyers Rising Star - California Lawyer of the Year by The Daily Journal - Pro Bono Attorney of the Year the USC Public Interest Law Fund Curt started his legal career in the Los Angeles office of the prestigious firm of Irell & Manella LLP, where his practice focused on a wide variety of complex civil litigation matters, including securities litigation, antitrust, trademark, bankruptcy, and class action defense. Mr. Brown also has experience advising mergers and acquisitions and international companies concerning cyber liability and class action defense. He is admitted in California, Florida, D.C., Washington, Illinois, Colorado, and Michigan.
Nicholas V.
I am a solo practitioner with offices in Denver, Colorado and Austin, Texas with a focus on general business and real estate contracts.
September 19, 2021
Jonathan H.
I’m an attorney focusing my practice on concierge corporate and intellectual property law for startups and high-growth companies. I also serve as outside General Counsel to several businesses in various sectors. Since founding my practice I've worked with hundreds of clients across a variety of industries. My experience as a former General Counsel of a premier edtech company gives me unique insight into the challenges my clients face and how to resolve them efficiently and cost-effectively.
August 18, 2021
George F.
The Law Office of George K. Fuiaxis, from the very beginning in 2002, has built a reputation with its clients as an unmatched, diligent, hands on law practice that is always on duty to find the best course of action for its clients. With a supreme pledge of exceptional service to its clients in the areas of Real Estate (Commercial & Residential), Loan Modifications, Intellectual Property, Corporate Law & Business Transactions, Wills, Trusts & Estates, the Law Office of George K. Fuiaxis creates solutions for the many faceted problems faced by its clients. The office represents several various clients, including well known lending institutions, foreign and domestic corporations, sellers and buyers of residential and commercial real estate, residential and commercial landlords and tenants, well known restaurant and business owners, automobile dealerships, airline companies, well known fashion, sports and entertainment industry individuals and corporations, information technology (IT) startups and well known IT companies.
August 22, 2021
Chris J.
I'm a business law generalist with over 24 years of experience, including as in-house General Counsel, as outside counsel through my own firm and as an attorney in an Am Law 100 law firm. My employers and clients uniformly appreciate my ability to (i) negotiate and close transactions quickly and effectively, and (ii) to make the complex simple. Among other things, I can efficiently assist you on entity formation, governance, and structure; HR issues; mergers and acquisitions; and the negotiation and drafting of all types of commercial contracts. I'm the proud recipient of multiple Martindale-Hubbell Client Distinction Awards given only to the top 5% of attorneys for quality of service.
August 23, 2021
Gregory W.
Strategic thinking business minded Outside General Counsel here to help you with your company. I have been able to help guide business owners from startup through series A, B, & C funding and ultimately IPO's. Regardless of your plans I am here to help you succeed as you grow your business.
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