Triple NNN Lease - How Insurance and Taxes are handled

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Triple NNN Lease - How Insurance and Taxes are handled

Farzad Nejad
Real Estate Agent · New Hope, PA · Member since 2019 · 7 posts · 1 vote

How are the Taxes and Insurance handled in a triple NNN lease?

- Would the Landlord bill the Tenants every year? Monthly? 

- Under who's name would the building insurance be under?

- How are the Taxes and Insurance calculated for the term? Do they increase yearly? By how much? 

- Can landlord use taxes paid by tenant as a write-off? 

- Can tenant use taxes paid by them as a write off? 

Any insight or additional comments or questions are appreciated and welcome. Thank you in advance! 

Regards,

Farzad 

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Ronald RohdePro Member
Attorney · Dallas, TX · Member since 2016 · 5k+ posts · 2k+ votes
5y
Originally posted by @Farzad Nejad:

@Ronald Rohde thank you Ron, much appreciated.

Of course, we do at least 1 NNN lease per week in our office.

RE: The deduction is usually for tenant, I think the IRS says something like an expense that is not reimbursed or similar. So a traditional NNN tax expense is reimbursed by the tenant.

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  • Kristine HodgesPro Member
    Rental Property Investor · Broomfield CO and Estes Park, CO · Member since 2017 · 52 posts · 45 votes
    5y

    It all depends how the lease is written.  The lease wording will clarify all of these items.  It is all negotiable between the parties.  

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  • Ronald RohdePro Member
    Attorney · Dallas, TX · Member since 2016 · 5k+ posts · 2k+ votes
    5y
    As

    Originally posted by @Farzad Nejad:

    How are the Taxes and Insurance handled in a triple NNN lease?

    - Would the Landlord bill the Tenants every year? Monthly? 

    - Under who's name would the building insurance be under?

    - How are the Taxes and Insurance calculated for the term? Do they increase yearly? By how much? 

    - Can landlord use taxes paid by tenant as a write-off? 

    - Can tenant use taxes paid by them as a write off? 

    Any insight or additional comments or questions are appreciated and welcome. Thank you in advance! 

    Regards,

    Farzad 

    As noted, it all depends on the lease, but "generally" as follows:

    landlord will estimate future total expenses, prorate and bill each tenant monthly. At the end of the year, there is a true up for any difference.

    Building is insured under the owner, landlord.

    Taxes and insurance are actual costs, nothing automatic.

    The tax treatment is up to your CPA, you're not going to double dip, but just see the lease for guidance. We draft all sorts of agreements...

    1Reply
  • Farzad Nejad
    OP
    Real Estate Agent · New Hope, PA · Member since 2019 · 7 posts · 1 vote
    5y

    @Ronald Rohde thank you Ron, much appreciated.

    0Reply
  • Ronald RohdePro Member
    Attorney · Dallas, TX · Member since 2016 · 5k+ posts · 2k+ votes
    5y
    Originally posted by @Farzad Nejad:

    @Ronald Rohde thank you Ron, much appreciated.

    Of course, we do at least 1 NNN lease per week in our office.

    RE: The deduction is usually for tenant, I think the IRS says something like an expense that is not reimbursed or similar. So a traditional NNN tax expense is reimbursed by the tenant.

    1Reply
  • Basit SiddiqiBusiness Member
    Accountant · New York, NY · Member since 2015 · 8k+ posts · 3k+ votes
    5y

    - Can landlord use taxes paid by tenant as a write-off?

    If the tenant pays the taxes and you are reporting the 'write-off', you will also report the 'reimbursement' as income, so it ends up as a wash.

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    1Reply
  • Farzad Nejad
    OP
    Real Estate Agent · New Hope, PA · Member since 2019 · 7 posts · 1 vote
    5y

    @Basit Siddiqi that makes sense, thank you

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