NNN Lease Limitations on Tenant Tax & Insurance Liability

Real Estate Broker · San Marcos, TX · Member since 2015 · 7 posts · 2 votes

Has anyone ever seen any language in a Triple Net Lease limiting the Tenant's Tax & Insurance Liability. It seems like the owner would have no incentive to fight tax & insurance increases if the tenant is 100% responsible.

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Ronald RohdePro Member
Attorney · Dallas, TX · Member since 2016 · 5k+ posts · 2k+ votes
6y
Yes, typically tenant can protest
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Aamir V.
Investor · Houston, TX · Member since 2018 · 25 posts · 5 votes
6y
In our leases I’ve seen two things. First, the insurance is usually directly handled by the tenant so the pricing is up to them as long as they meet the minimum requirements of coverage and grade. So as landlords we don’t see anything but the certificate of insurance showing us as additionally insured. Second, the taxes are taxes and there is an understood agreement on protesting to the county/entity on a yearly basis. This is also usually handled by the tenant in our case but we do it for one of the them. For that one we end up footing the bill but that was a post-signing discussion and we decided to do it for the relationship.
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Joel OwensBusiness Member
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Real Estate Broker · Canton, GA · Member since 2010 · 15k+ posts · 11k+ votes
6y
Depends on what is in the lease. Often Starbucks CAPS first year property taxes they pay. Taxes are an uncontrollable expense because based on what county or city is trying to assess and hit property owner with. So if my client is buying a Starbucks we look to make sure starting cap per sq ft has a big enough range where the buyer will not be making up the difference.
For insurance you want to look at what the tenant is required to carry and pay for. Landlord might want business interruption insurance where landlord still gets paid for short fall from tenant if tenant can exercise certain rights within the lease to pay less rent or none at all if certain events occur. So if landlord adds extra coverages to insurance policy tenant reimburses for need to make sure it's allowable per the lease or tenant may say they will not pay for those extra items just general coverage.
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