Modified Net Leases for Apartments?
C
ommercial properties have used Net Leases for many years. These Net Leases require the tenants, in addition to the base rent, to pay some of the operating costs related to the property such as property taxes, property insurance and maintenance costs. If all three of these items are included in the Net Lease, it is usually called a Triple Net Lease or NNN Lease. What if we considered implementing the same type of lease terms for apartments
BY JOSEPH DECARLO, CPM, CCIM
and other residential rentals? Since apartment owners have an implied warranty of habitability, which is non-waivable by the tenants per Civil Code 1941.1 and State of California Health and Safety Code, we can only include the incorporation of the property taxes and property insurance as an additional item to be included as part of the terms of residential tenancy. Apartment rents have been traditionally gross leases. Gross leases are
when a tenant pays the base rent only. The base rent is supposed to include all the owner’s costs such as the following: • Property Taxes • Maintenance • Capital Improvements • Unit Repairs • Cost of Materials Net Leases — continued on page 32
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Apartment News
www.aaoc.com
June 2022
Lic. No. 847279 B1 & C39
