Here are the answers to some questions that we are frequently asked.
Common Lease Terms
The three most common types of leases are:
1. Triple Net (NNN)
A NNN lease, also called a ‘net lease’, exists where the tenant is responsible for paying, in addition to their base rent, their proportional share of common area maintenance (CAM) which includes expenses such as property taxes, insurance, management and maintenance. The lease is the governing document the sets out what expenses will be recouped, how the charge is to be calculated, and when it is due to be paid.
2. Modified Gross
A modified gross lease exists where the tenant, in addition to their base rent, pays their proportional share of any increase in outgoings over and above the first year they occupied the building. Again, the lease is the governing document the sets out what outgoings will be recouped, how the charge is to be calculated, and when it is due to be paid.
A gross lease is where the tenant pays only a base rent (plus their share of direct usage charges such as utilities), and the landlord is liable for property taxes, insurance, management and maintenance. Gross leases are usually higher per square foot than NNN or modified gross leases to compensate the landlord for the outgoings they incur.
At Sunizo, regardless of the type of lease that existed prior to us managing the property, all new and renewed leases are on a NNN basis.
What Costs Am I Responsible For?
The costs you are responsible for will be specified in your lease, so refer to it to be certain.
That said, costs you will usually be responsible for include:
- Rental charges, even if you leave the building vacant or walk out on your lease before it has expired
- Common area maintenance charges, which is your share of the property taxes, insurance, maintenance and management of the property (see above)
- Any damage you, your customers or their guests, or any other person whether or not invited on to the property, cause to the property and its common area
- Costs associated with getting the space ‘rent ready’ for the next tenant (e.g. rubbish removal, repainting, changing lights, etc.)
How Do I Budget For My Common Area Maintenance Charge?
Based on a budget we will prepare and provide you with before you sign the lease, you’ll incrementally pay (on a monthly basis in addition to your base rent) our estimate of your annual common area maintenance charges. We will do a reconciliation at the end of the year. If you’ve paid too much then we will refund you the overpayment. If you have paid too little you will need to fix up the shortfall.
How Can I Get You To Manage My Investment Property?
If you’d like to discuss the services that Sunizo can offer to manage your investment property then please email us the details of the property and the best way to contact you to discuss this in more detail.