Modified net lease is a compromise between the triple net and the gross lease. The tenant and landlord set up a split of maintenance expenses where the tenant agrees to pay taxes and insurance. Utilities may be negotiated in the modified net lease. This type of lease may be used in industrial, retail or multi tenant office properties as dealt by Sands Investment Group. Tenant resistance to triple net leases, in older properties, makes modified net lease more popular. It allows a compromise situation which shares the costs of building operation and maintenance. The terms of modified net lease are varied as building and tenant business types. The flexibility of the least type makes for easy agreement between landlord and tenant. Many leases have been put together because of modified net lease terms.
Modified net lease is a variation deal that falls between a triple net lease and a gross lease. Every modified net lease contract is unique but there is a division of financial responsibilities between the property owner and tenant, so that the deal is beneficial on both the sides.
Understanding Modified Net Lease
Modified net lease divides maintenance and repairs between the tenant and the owner and gives the responsibility of taxes and insurance to the tenant along with the monthly rent. Depending on the type of locations and building utilities and negotiated as a split cost in the deal. Understand variations of a modified net lease, you must know how gross leases and triple net leases are structured. A modified gross lease is the blend of the two types of lease.
Different Types Of Leases
Triple net lease property offers long-term tenant contracts. Triple net lease contains details and terms that are negotiated so that they are favourable for both the tenant and the property owner. In this type of lease the tenant takes on major financial responsibilities related to the property.
Gross lease is structured so that the property owner maintains the property and takes all the financial obligations of the investment including property repairs, taxes or improvements and insurance. The tenant pays the monthly rent, which the property owner can use to cover all of their costs.
Modified let lease is in the middle between the triple net lease and gross lease . It is used to make deals favourable for tenants and protect the interest of the Investor by dividing some property expenses. The business type and property of location are the factors needed for a modified net lease and are used mostly on retail, multi-tenant and industrial properties.
Benefits
Modified net lease has the highest advantage of compromise. Triple net real estate is good to both investors who wish for low risk investment with consistent returns and the tenants who wish a location or established building for their business. There are factors that cause tenants to shy away from a deal and this is where modified net lease can secure reputable tenants or business in an investment property for a long period.
It is important that you understand details of the contract fully, if you are considering a property with modified net lease. This helps you determine those terms if they fit your investment criteria and Portfolio plans.
