A standard triple net lease transfers 3 property expenses to the tenant in addition to rent and utilities:
- building insurance
- real estate taxes
- maintenance expenses.
Transferring these expenses helps the owner net a high percentage of income from the property, but it doesn’t protect the investor against all financial losses. For example, if the property is condemned, a standard triple net lease seldom stipulates that the tenant must continue to pay rent.
There is, however, a triple net lease that protects owners of triple net properties from losing rental income in the wake of a condemnation, and establishes other financial conditions toward making the lease “completely net” under all circumstances: a bondable lease (a.k.a. hell or high water lease). When triple net real estate in New York is rented under a bondable lease, it provides the owner with the following advantages that a standard triple net lease does not.
NO RENT ABATEMENT
If the property is destroyed, partially condemned, or fully condemned, the tenant must continue to pay rent as usual. This allows the property owner to establish a truly secure stream of income from the real estate and make other investment plans knowing that income from the property will always be available.
TENANT REBUILDS PROPERTY
Even though the tenant pays for building insurance, it must pay to rebuild the structure if it is damaged. This may seem unfair to the tenant, but it should be noted that most bondable lease tenants are highly successful corporations that can easily afford the conditions a bondable lease establishes.
LEASE IS INTERMINABLE
The tenant is obligated to complete the lease regardless of its desire to do otherwise. In most situations, bondable lease tenants are at a location because it is highly desirable for their business. However, if their perception changes, there are no cancellation clauses in the lease that permit them to leave.
LOOKING FOR BONDABLE LEASE PROPERTIES?
In an area where weather damage to commercial buildings is a common concern, such as the Eastern Seaboard, triple net property investors are wise to look for properties that have bondable leases. In the event that a storm displaces the tenant and/or damages the property, the owner doesn’t lose money. In fact, he stands to gain money by pocketing the insurance settlement if the building is damaged, as the tenant is required to pay for repairs to the structure.
If you are interested in acquiring US investment property that has a bondable lease, contact Westwood Net Lease Advisors. We have years of experience helping investors find triple net properties in New York that meet their investment needs. With our proprietary database of on-market and off-market properties, coupled with our connections in the triple net real estate market, we have the resources you need to make the best acquisitions for your financial goals.
