Category: Real Estate

Net Leases and the Small Business Owner–Part II

As we discussed in the last “net lease” post, “net leases” shift costs and risks that are traditionally borne by the landlord to the tenant.  A “triple net lease” requires the tenant to pay property taxes, property-related insurance premiums, as well as maintenance and upkeep costs associated with the property.

The longer the proposed term of the net lease, the more the small business owner may wish to approach the terms and conditions of the lease as if the small business owner was purchasing the space.  If the small business owner is going to agree, for example, to pay for the maintenance and upkeep of the property (as if he or she was the property owner) for the next five years of more, you may be better served truly understanding your risk of such costs with the particular property before you sign on the dotted line.  Ask the landlord for records regarding work completed on the property.  Ask the landlord to disclose any issues with the property.  Have there been issues with water in the basement?  How old are the roof shingles, etc.?  You may also wish to consider having a trained real estate property inspector for the type of property you would be leasing, inspect the property for issues before you lease, so that you better understand the risks you are assuming when you agree to pay maintenance and upkeep costs associated with the property.

Remember that the landlord will typically be more willing to negotiate and disclose before you sign.  As a result, your legal and other advisors can often make a bigger difference for you if you retain them and seek their advice before you sign.  Your space is a critical investment for your business.  Make sure your investment is a good one.

[Legal advice not only involves an understanding of the law, but the application of the law to a particular set of circumstances or facts.  Blog posts are imperfect tools to address the subtlety and exceptions of the law that may apply in your situation.  As a result, the information in this blog post does not represent legal advice.  If you are in a situation where you need or desire legal advice, we would be happy to help.  Call Paul at 608-358-9413 or complete the Contact Us form to set-up your no-charge initial consultation.]

Net Leases and the Small Business Owner–Part I

Particularly small business owners may face the choice of whether or not to enter into a net lease.  What is a net lease and why should you care?

To varying degrees net leases shifts costs and risks that are traditionally borne by the landlord to the tenant.  Under what is termed a “single net lease” the responsibility for paying property taxes is shifted from the landlord to the tenant.  A “double net lease” shifts the responsibility for paying both property taxes and property-related insurance premiums to the tenant.  Finally, a “triple net lease” requires the tenant to pay property taxes, property-related insurance premiums, as well as maintenance and upkeep costs associated with the property.

Why should you care?  The boilerplate language in your net lease can shift important costs and risks to you, the small business owner, that you should consider, understand, and analyze before you sign the lease.  In Part II of this series we’ll discuss how you may wish to consider changing your perspective on net leases before you sign on the dotted line.

[Legal advice not only involves an understanding of the law, but the application of the law to a particular set of circumstances or facts.  Blog posts are imperfect tools to address the subtlety and exceptions of the law that may apply in your situation.  As a result, the information in this blog post does not represent legal advice.  If you are in a situation where you need or desire legal advice, we would be happy to help.  Call Paul at 608-358-9413 or complete the Contact Us form to set-up your no-charge initial consultation.]

“Defects” under the Residential Real Estate Condition Report

It is expected that potential buyers of residential real estate will rely on the disclosures provided by the seller in the Wisconsin residential real estate condition report.  Among other things, in this report the seller discloses “defects” affecting the property.  However, potential buyers should be aware of what is meant by a “defect” for purposes of this report.  In Wisconsin, under the standard residential real estate condition report, a “defect” is defined as “a condition that would have a significant adverse effect on the value of the property; that would significantly impair the health or safety of future occupants of the property; or that if not repaired, removed or replaced would significantly shorten or adversely effect the expected normal life of the premises.”  As a result, there may be many conditions affecting the property which the seller is not obligated to disclose to the buyer as these conditions do not rise to the level of “defect” as defined in the report.  If there are certain conditions of the property (for example, no basement water issues) which are deal breakers for the buyer but do not rise to the level of a “defect” under the Wisconsin residential real estate condition report, the buyer may wish to modify the offer to purchase initially submitted to the seller to require the disclosure of these conditions and to specify the remedy for buyer if such conditions are disclosed.

[Legal advice not only involves an understanding of the law, but the application of the law to a particular set of circumstances or facts.  Typically blog posts are imperfect tools to address the subtlety and exceptions of the law that may apply in particular situations.  As a result, the information in this blog post does not represent legal advice.  If you are in a situation where you need or desire legal advice, we would be happy to help.  Call 608-358-9413 to set-up a no-charge initial consultation.]