NNN - does this insurance amount sound reasonable?

Question

I own an office building (I used to practice in it but have since sold the practice and the new owner is leasing the building from me) with a NNN lease. I believe my lease says I pay for the roof and parking lot.  He opted to pay the insurance himself instead of reimbursing me (he sent me proof of coverage and I am currently working for him part time).  Obviously I need to pay insurance for my part but I'm not sure my insurance agent understands NNN - my insurance for my part was  ~$1800 for the year.  The building most recently appraised for $300K.  Any thoughts if I'm overpaying? Prior to the sale I was the leaser and the leasee.  Thanks for you thoughts!

Henry Clark · Answer

Always pay your own insurance and property taxes.  Makes no business sense for him to pay. Especially for that small

Every year not only do you need proof of insurance but you need a copy showing you listed as “additional insured”. If someone slips and breaks their leg they will come after you and not him. His insurance lawyers will not represent you.  You will have to hire legal counsel.  Settle “cash out of your pocket” then approach his insurance. $1,800 insurance fees doesn’t cover much legal fees or anxiety. Two years later.

No sense for him to pay insurance or just in case property taxes.

Henry Clark · Answer

Always pay your own insurance and property taxes.  Makes no business sense for him to pay. Especially for that small

Every year not only do you need proof of insurance but you need a copy showing you listed as “additional insured”. If someone slips and breaks their leg they will come after you and not him. His insurance lawyers will not represent you.  You will have to hire legal counsel.  Settle “cash out of your pocket” then approach his insurance. $1,800 insurance fees doesn’t cover much legal fees or anxiety. Two years later.

No sense for him to pay insurance or just in case property taxes.

Carrie Kearns · Answer

The roof is about 10 years old and I put up new siding and replaced about 3/4 of the parking lot. Rent is 3200/mos which is at the top of the market. So I feel like I’m in a pretty good place.

Joel Owens · Answer

I have had doctors sell their business and then stay on for 1 year with company that bought them out. The doctor retained the real estate. Often larger companies take advantage of smaller owners when buying their business with the lease. They offer great multiple buying the business but pound them on lease terms.

Hopefully roof and structure is newer or you could have hug expense in the future.

You do not have a NNN lease you have at best a NN lease or modified gross lease which is not as desirable because you can have UNKNOWN current and future obligations for expenses that are hard to quantify but usually a fixed lease rental schedule.

Insurance might be high because building is older or it's a single policy versus a larger property owner that gets bulk discount pricing for adding another property to insure once a certain threshold is met.