Who Pays for a New Roof in a Triple Net Lease?

One of the most important aspects of a commercial lease is the maintenance and repairs responsibilities, which can differ according to the type of lease you’re looking at. A triple net lease, or NNN, is one of the most common types of leases. It is known for being quite flexible when it comes to apportioning maintenance and repair tasks between the landlord and the lessee. 

However, if you have an absolute net lease, this means that all responsibilities related to maintenance will fall on you, the lessee. If that’s not the case, the subject of who is responsible for a roof replacement is up for debate. To get started here is all you need to know.

Understand the Triple Net Lease

The first thing you need to know is how the NNN lease works. Basically, a triple net lease is an agreement on a property where the tenant is required to pay all expenses of the property, including real estate taxes, maintenance, and building insurance. These payments are made along with fees for rent and utilities. 

For that reason, the rent charged in this type of lease is significantly low compared to other types of leases. When calculating the capitalization rate, the creditworthiness of the tenant is factored in. Investors are attracted to this type of lease, as it provides a stable income without having to concern themselves with management costs or vacancy factors.

Owner’s Responsibilities

Assuming that your NNN lease is not absolute, the owner’s responsibilities could be as numerous as the tenant’s, or they could be less. The real estate advisors at AustinTenantAdvisors.com say the owner’s responsibilities are usually limited to three aspects of the property: roof (including repairs, upgrades, maintenance, and replacement), exterior walls of the NNN property, and the utility repairs. The latter is the owner’s responsibility only when it comes down to major plumbing or electricity issues. 

Otherwise, they won’t fall under the landlord’s responsibilities. These responsibilities can change upon negotiation, so if there are any changes you wish to make to the clauses under the lease, make sure to discuss them with the landlord before purchasing the property. You should do so in the company of a NNN lease expert.

Tenant’s Responsibilities

NNN lease details that the tenant must handle maintenance fees. This may include maintenance fees and operating costs such as installing security systems, janitorial services, parking lot maintenance, inspection fees, landscaping, lighting, building management fees, and association fees. Similar to the owner’s responsibilities, a tenant’s own tasks and responsibilities can change according to negotiations and NNN’s clauses; however, when you agree to that lease, make sure that your rent is comparatively low against these costs. A good real estate agent will give you pointers on which clauses can work in your favor and which ones to negotiate with the landlord.

Roofing and NN Leasing

Where do roofing replacements come in? People would generally believe that this type of replacement is the tenant responsibility, but that depends on the lease rules that were previously negotiated. It is usually more beneficial for landlords to replace the roof of their property before selling the NNN property, as this can increase the value of their property by 5-8%, a value that will exceed the costs of a roof replacement by miles. 

However, if that isn’t the case, the burden of a roof replacement typically falls on the landlord’s shoulders unless otherwise stated in the lease rules. If you’re the property owner, you may want to take that step, so when you set up your property at a high price point, buyers will actually have a solid reason to take you up on your offer. However, if you’re a buyer, you may want to double-check the NNN lease rules because let’s face it, roof replacements aren’t exactly cheap.

Negotiation is the Key

As you may have already deduced, negotiation makes a determining factor in a net lease. It is commonly known that owners are financially responsible for building upkeep and general repairs; sometimes, items can be passed through to the tenants. This can only be determined through negotiation. Thus, if you play your cards right and have prior experience in negotiation, a good deal can be struck between you and the landlord.

In short, every NNN lease can be unique, depending on the outcome of negotiations and agreements. Thus, there’s no cut-clear answer to whom the expenses of the roofing will fall on. If you’re worried about the state of the property’s roof, the best course of action, in this case, would be to consult an NNN lease expert, as they’ll be able to tell you from which angle you can approach this in negotiations.