What is Single-Tenant Net-Leased, and What Costs Should You Consider?
What are the Basics of Single-Tenant Net-Leased (STNL or NNN) Properties should you consider? The most important part of the commercial real estate leasing process is ensuring you’ve determined what kind of space you’re looking for! We’ve identified the best questions to help you answer the question of how to rent and find the perfect space.
What is a Commercial Lease?
If you are planning to rent a new business space, there are many different things to consider. STNL is a legally binding contract between a commercial property owner and a tenant in which the landlord transfers possession and use of the premises to the tenant for commercial purposes.
You should read and analyze all of the terms of the contract very carefully, not just the amount of rent. If either party fails to follow the terms of the agreement, it could result in fines, inability to use the premises, or even termination of the lease.
What Type of Property are you Looking for?
Are you looking for retail space, office or industrial space, or maybe an apartment to park your spare cash? This situation is pervasive if you represent a large business.
For example, you need an office, store, warehouse, office space, and manufacturing site. Whatever your situation, before you begin your search, determine what type of property you need and narrow your search to just those types of spaces.
What Kind of Space do You Need?
How do you rent the space? It is related to the point above. Additionally to the purpose of the area, you need to determine what will be in the rooms. Is there enough space to accommodate employees if it is an office or equipment and machines in a shop or factory?
What Services Will You Need in the Space?
Make an extended list of all the services you may need to run your business. Of course, you can’t do without bathrooms and the Internet to work correctly on the premises. But you may also need offices, kitchens, meeting rooms, rooms for presentations and training sessions, dressing rooms, archive rooms, and rest areas.
What Impression do You Want to Make?
Company offices can tell you a lot about the business itself. For example, a high-tech company or a bank serving VIP clients will want a cutting-edge and functional space. On the other hand, a store wants a space that allows for the maximum amount of product in the minimum amount of space but doesn’t feel like a warehouse.
Repair and Redevelopment
Many tenants try to equip the premises for their needs, which requires repairs. These activities are costly, so you should discuss with the landlord compensation for the cost of repairs or the provision of rental vacations. That way, you can reimburse all or part of the repair costs.
It will usually be your most significant expense with STNL, and the rate calculates the rent. Rent is generally paid in advance, monthly, or quarterly.
When you sign a contract, the landlord requires a security deposit equal to one month’s rent to guarantee reimbursement for damage to the premises. Sometimes the landlord may require an irrevocable bank guarantee for a certain amount instead of money.
It is a standard part of your expenses for Single-Tenant Net-Leased in Class A and B office centers and shopping centers. Services included in operating expenses may vary from building to building but generally have the following types of services:
common area cleaning;
elevator cleaning and maintenance;
lighting in common areas;
maintenance of standard utilities;
routine maintenance of common areas and roofs;
ventilation and air conditioning;
household waste removal;
Charges to operating expenses may be included in general building reception services and issuing passes for employees and visitors.
The functioning of an office is impossible without the consumption of utilities. It includes water and wastewater, power, and heat supply. With Single-Tenant Net-Leased, the tenant must pay all utilities to the rent.
Check if you need a parking lot, which is included in the STNL agreement. Renting some housing may be challenging; it will be twice inconvenient if there is no space for your car.
The tenant always pays telecommunications and Internet services and all other costs. In some office and retail centers, tenants may have limited or no choice of telecommunications and internet service providers.
Contents insurance is a must for any company looking to protect its resources. Sometimes, the landlord will insist that the premises be insured against damage and third-party liability insurance. In some cases, these costs can be pretty substantial.
Rent Revisions and Lease Amendments
Your lease may contain provisions that allow the landlord to change the rent. It is pretty standard, but the change terms must be clear to you before you agree to them. It’s essential, and the owner can’t just impose a rent increase whenever they want.
Duration of a Contract
The parties must agree on the length of the tenancy agreement and the possible reasons for which it may be limited. The more detailed these reasons are, the fewer grounds the other party has to challenge the termination.
Your contract should also state whether you have a right of first refusal to renew the lease when it expires.
Your right to cancel the agreement will allow you to cancel the lease at any time, as long as you give proper notice in writing to the landlord.
Getting Your Space Back
When a Single-Tenant Net-Leased agreement is canceled for any reason, the tenant must return the premises according to the agreement’s condition. Unfortunately, when they sign a lease, many tenants don’t even think that the contract will end at some point and will have to return the property.
But the landlord always thinks about this. So check beforehand what is written in the contract and prepare to meet the agreed terms. It will allow you not to pay rent for premises you do not use but that the landlord refuses to take.