Weigh the costs:
Remember, signing a triple net lease requires the child care center to purchase insurance on the building in addition to performing maintenance. If a dying tree falls on the building the child care center will now have to pay the property insurance deductible. Likewise if gutters, storm drains, sewers, or sprinkler systems fail the center will be responsible for the insurance deductible and any repairs the insurance policy may not cover. In the meantime, the building owner who has an interest in the property being well maintained has placed the maintenance responsibility on the tenant. Any deferred maintenance that negatively affects the appearance of the property, such as dead trees, now gives the appearance of a run-down center and may cause potential clients to look elsewhere for their child care needs.
If you just realized your center is in an unfavorable lease agreement with the building owner there are options. First priority is to make sure as the responsible party you are having building and property maintenance completed either by staff or hired contractors. Paying a contractor to handle maintenance is a much better option than ignoring it for long periods of time.
Review your lease and consider renegotiating at the contract end for a more traditional lease. You may pay more for monthly rent, but if you weigh this against the costs of property insurance, maintenance and property taxes you may find you come out ahead. Also, a good time to negotiate lease terms if the landlord is presenting a triple net lease is at the beginning of the term before the paperwork is signed. The landlord may be willing to take care of many maintenance items in order to encourage a new tenant to sign. Spell out the terms of the maintenance items to be done so there are no questions after the agreement has been signed.
Since laws vary by state it is a good idea to have a real estate attorney in your state review the lease for potential problem areas. Many leases are written one-sided in favor of the landlord and require the tenant to agree to accept liability for all accidents that may happen on the property regardless of their cause.
As a business owner if you have good service vendors to perform various aspects of property and building maintenance a triple net lease may make sense. Where we see problems is when owners wait until they have a problem and contact the landlord for assistance only to be told they’re responsible. This delays the maintenance further and can result in unnecessary property damage and insurance claims.
The information provided in this article is intended for general informational purposes only and should not be considered as all encompassing, or suitable for all situations, conditions, and environments. Please contact us or your attorney if you have any questions.