TIL a triple net lease isn't always the landlord's best friend

I used to think NNN leases were the holy grail for landlords. Had a tenant in a strip mall in Phoenix who signed a 10 year NNN and I thought I was set. But then the HVAC died during a July heatwave and I assumed they'd just pay to replace it. Turns out that specific lease had a clause where capital expenditures over $5k got split 50/50. Learned that one the hard way after a $12k bill. Anyone else get burned by something hidden in a lease they thought was bulletproof?

2 comments

2 Comments

cora_perez24d ago

Wait have we been taught that NNN leases are supposed to be 100 percent the tenant's problem? Because yeah that sounds like a nightmare waiting to happen. Evan's right, a 50/50 split on big stuff like that actually makes way more sense in the long run. If the landlord has some skin in the game for major repairs they're way more likely to keep up with regular maintenance before something dies completely. I'd rather pay half of a $12k fix every few years than get stuck with zero roof replacement or parking lot repaving because the tenant just bails when things get expensive. Honestly the leases that put ALL capital costs on the tenant just tempt the landlord to let the property rot until the tenant walks away.

the_evan24d ago

Hear me out but maybe the lease was actually working as it should. A fifty fifty split on big repairs like that keeps both sides honest and stops landlords from ignoring maintenance until something totally blows up. You still recovered half of it which is way better than eating the whole thing yourself.