Triple Net Lease Renewal - Questions
Hi - I have a commercial building that I'm leasing (triple net lease) that is due to come up for renewal after (5) years. Since this is my first commercial investment five years ago, the original lease/negotiation of the commercial lease was done by my attorney. Should I have my attorney review the current lease for renewal and advise me on any changes; what the base rent should be since it will be locked in for another (5) years? Or this lease something I can do myself? Please advise.
Do I notify the tenant of the renewal of the lease and increase of rent a year in advance? I've been doing some research on Triple Net Leases and some owners do the renewal/negotiation themselves but this is new to me and I need some guidance on the process. I own rental properties and handle the renewal of leases each year, and understand that process. With Triple Net Leases, the tenant pays for property taxes, insurance premiums and maintenance fees, etc.
Where can I find some information on triple net leases for landlords that would be helpful. Any advice/suggestions would be appreciate. Thanks!
you can negotiate the renewals, your lease should state how long advance the tenant can notify you if they plan on staying or vacating the space. let me know if you need any help. I have done all my leasing from my commercial properties.
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@Elizabeth Lagattolla
If it’s a good tenant you could do 5tr lease with a 5 year option. Rent should increase and typically it does, some go up every year and some at renewal. Just depends. I would still have the attorney finalize whatever is agreed upon
I've done all my releasing. It's more affordable, saves time, and I have added things over the years that most lawyers haven't thought of. In some cases it's a simple one page amendment. You already have the base lease and odds are there is a renewal clause in there somewhere and yes you need to notify them of the renewal asap. The biggest thing is to clarify what defines the NNN expenses because it can be vague when it comes to HVAC, Roofing, Parking lot, Sewer, etc. The difference between maintenance and replacement needs to be defined as well as service contracts for HVAC, sprinkler, Hood, pest control etc. What you don't want is a vague lease on these items. Happy to help.
Check your current lease for options to renew.
You should always have an attorney do a commercial lease. If you have the same one who did the original it should not cost that much.
Not much else to add not knowing any more details.
I think it depends on your comfort level with details and level of desired involvement. Also on the financial size. If it’s a sizable deal, outsource and spend that time saved making more money doing wear you like. If the cost is an issue that’s a different story.
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Your lease should dictate what the renewal rate will be; if not, "fair market value" is what the law would provide.
I'd have your attorney do it, I post a lot about NNN leasing, here or other online platforms
I think it depends on your comfort level with details and level of desired involvement. Also on the financial size. If it’s a sizable deal, outsource and spend that time saved making more money doing wear you like. If the cost is an issue that’s a different story.
You can negotiate the terms of the lease on your own, but I suggest having an attorney review/create the lease amendment/extension. Many of the terms may already be dictated by what's in the current lease. Make sure to check that there aren't any extension options within the current lease. If there are no extension options, this is your chance to add value. Perhaps their rent is below market, or they had carveouts for certain expenses in the CAM. Speaking with a local broker that is familiar with NNN leasing is also a good idea to make sure that you are charging the market rate on everything.
Quote from @Brock Mogensen:
You can negotiate the terms of the lease on your own, but I suggest having an attorney review/create the lease amendment/extension. Many of the terms may already be dictated by what's in the current lease. Make sure to check that there aren't any extension options within the current lease. If there are no extension options, this is your chance to add value. Perhaps their rent is below market, or they had carveouts for certain expenses in the CAM. Speaking with a local broker that is familiar with NNN leasing is also a good idea to make sure that you are charging the market rate on everything.
I know from residential side our agent will prepare a lease extension for us and tenants to sign. On commercial side I am still pretty new and have never renewed a lease before. From what you said above it sounds like it's the same with commercial lease, that if we have an extension option and if tenants choose to stay and renew then all we need to do is to do a lease extension form?
I would pay more attention to your planned holding time and then focus on leasing structure.
Investors often just think about the yield and what THEY would be comfortable with in a lease while owning it INSTEAD if what their buyer will want in it when they go to sell.
I have been doing this a long time and see investors own a property, cash flow it well, but then allow a bad new lease or extension and have a very hard time selling the property when they want to move to something else.
I pay my commercial attorney to do the lease and any amendments. He is 300 an hour and my time is worth thousands per hour so it's just a built in cost for me.
@Elizabeth Lagattolla A lot of it depends on your original contract.
It should state the notification period for renewal (yours and the tenant's), it might also include a set rate for the renewal (not uncommon in NNN leases).
If it doesn't set a rate for the renewal and only says "market rate" then you'll need to figure that out as well.
The renewal, if there is an option in the original contract, would be an amendment to the original contract. In that case, I'd match what happened when the contract was created. If it's a custom contract created by the attorney, have an attorney form the amendment. If it was a standard form provided by a broker, I'd find a broker to provide the amendment from the same source. mixing and matching wouldn't be very advised... When in doubt, choose the attorney!
If the original contract doesn't have an option to renew then I'd recommend creating a brand new contract from scratch.
Good luck!
Courtney,
PM me and I will send you a lease extension example. Then you can decide If it's something you can handle on your own.
Quote from @John McKee:
Courtney,
PM me and I will send you a lease extension example. Then you can decide If it's something you can handle on your own.
Hi John,
I just PM-ed you. Thanks!
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Quote from @John McKee:
Courtney,
PM me and I will send you a lease extension example. Then you can decide If it's something you can handle on your own.
Be sure to deliver it properly, we just had a client today as Tenant send in an email renewal notice. LL ignored him. Lease required certified mail for any renewal notices to be proper.
Quote from @Ronald Rohde:
Quote from @John McKee:
Courtney,
PM me and I will send you a lease extension example. Then you can decide If it's something you can handle on your own.
Be sure to deliver it properly, we just had a client today as Tenant send in an email renewal notice. LL ignored him. Lease required certified mail for any renewal notices to be proper.
Hi Ron. For this tenant the lease only said 'If Tenant desires to renew this lease, Tenant must notify Landlord in writing of its intention to renew on or before the date which is at least six (6) months prior to the expriration of the Initial Term of this Lease'.
So I guess in this case an email renewal notice from Tenant is ok?
And it turns out we did sign an amendment with them in which we agreed to extend the lease to next year so I don't have to worry about this now. But still need to know so I will act accordingly next year.
Thanks.
Quote from @Courtney Nguyen:
Quote from @Brock Mogensen:
You can negotiate the terms of the lease on your own, but I suggest having an attorney review/create the lease amendment/extension. Many of the terms may already be dictated by what's in the current lease. Make sure to check that there aren't any extension options within the current lease. If there are no extension options, this is your chance to add value. Perhaps their rent is below market, or they had carveouts for certain expenses in the CAM. Speaking with a local broker that is familiar with NNN leasing is also a good idea to make sure that you are charging the market rate on everything.
I know from residential side our agent will prepare a lease extension for us and tenants to sign. On commercial side I am still pretty new and have never renewed a lease before. From what you said above it sounds like it's the same with commercial lease, that if we have an extension option and if tenants choose to stay and renew then all we need to do is to do a lease extension form?
Correct if there is an extension option in the lease and the tenant decides to exercise it, that amendment will be very simple. If you are going to be drafting a new lease, I suggest having a qualified attorney do it for you.
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Quote from @Courtney Nguyen:
Quote from @Ronald Rohde:
Quote from @John McKee:
Courtney,
PM me and I will send you a lease extension example. Then you can decide If it's something you can handle on your own.
Be sure to deliver it properly, we just had a client today as Tenant send in an email renewal notice. LL ignored him. Lease required certified mail for any renewal notices to be proper.
Hi Ron. For this tenant the lease only said 'If Tenant desires to renew this lease, Tenant must notify Landlord in writing of its intention to renew on or before the date which is at least six (6) months prior to the expriration of the Initial Term of this Lease'.
So I guess in this case an email renewal notice from Tenant is ok?
And it turns out we did sign an amendment with them in which we agreed to extend the lease to next year so I don't have to worry about this now. But still need to know so I will act accordingly next year.
Thanks.
In writing generally includes an email. You'll have to see if the lease calls for a different form. Also have a plan and reminder if they don't respond to the email--it could be lost in the ether. Wrong email address, etc.
Yes, the quote above is only from the Special Provisions section. I will need to look in the lease too to make sure it doesn't call for a different method of delivery.
Thanks.