The Importance of Net Lease Administration

By Jonathan Hipp

Print Email Share Reprints News Tip? Get Alerts

Net Lease Insider Archive

• Dollar General Now...
• ICSC Hosts First Ever Net...
• Net Lease Investors Find...
• Consumer Spending On the...
• Net Lease Profile: BB&T

More Related Topics

• DEAL-WRAPInfamous Purple Hotel Sells at Sheldon Auction
• Associated to Invest $107M in Desmond's Tower
• Realty Income Reports Yearly Rev. Increase of Nearly 18%
• DEAL WRAPStreetLights Residential Breaks Ground on First Multifamily Property
• From the April 2012 Issue of Real Estate ForumCole’s Sense of Purpose

Most Recent Blog Posts

• Net Lease InsiderDollar General Now Investment Grade
• Net Lease InsiderICSC Hosts First Ever Net Lease Property Panel
• Counter CultureDollar Stores Start Bidding Wars
• Net Lease InsiderNet Lease Investors Find Natural Home in Southeast Florida
• Net Lease InsiderConsumer Spending On the Rise in 2012

Related Videos

• ON LOCATION WITH ERNST & YOUNG'S SEYFARTHVIDEO: Special Servicers as Note Sellers
• ON LOCATION WITH TRANSWESTERN'S PUMPERVIDEO: Special Servicer Roles Shift
• ON LOCATION WITH FARIS LEE'S MCLELLANVIDEO: Retail Not Without Challenges
• ON LOCATION WITH BOB KLINEVIDEO: Distressed Note Sales Pick Up
• ON LOCATION WITH CUSHMAN'S ROTCHFORDVIDEO: Sale-Leasebacks Remain a Hot Topic
• ON LOCATION WITH CORENET'S WENSLEYVideo: CoreNet Plays Vital Role in SoCal Commercial Real Estate
• ON LOCATION WITH BENTLEY FORBES' MANOSTenants Are Paying More Attention
• ON LOCATION WITH COLE REAL ESTATE'S ROBERTSRetail Provides Net Lease Stability
• ON LOCATION WITH AEI CAPITAL'S HARRISONGood Deals Need Communication
• ON LOCATION WITH W.P. CAREY'S BARTHMAIERBuying to Suit

Upcoming Events

• ICSC ReCon 2012

Related Webinars

• Engineering Returns Through Energy Efficiency
• Charging the Hill: Commercial Real Estate and the 2012 Congressional Agenda

Lease administration of triple net leased properties (or any properties for that matter) generally involves making sure the tenant’s obligations, as defined in the lease, are enforced, as well as ensuring that the landlord is in compliance with any obligation that he may have under the lease.  Amongst other things, it involves making sure that you as the landlord are receiving not only proper rent payments but also ensuring that you are being reimbursed for all appropriate operating expenses.  Performing this task successfully is not difficult; however it does require organization and constant attention to detail.

Each lease in a portfolio will likely be different in at least one of the numerous details that outline how the landlord is supposed to be reimbursed for operating expenses.  The onus of enforcing and collecting on all reimbursable expenses falls on the landlord.  The tenant’s leasing department is certainly not concerned with making sure that every expense is accounted for in the billing, creating the potential for sizable amounts of income to be foregone if one fails to stay on top of these issues.  Collecting this reimbursable income can realistically be the difference between a successful investment and one that fails to meet the investment strategy of the owner.

The process of collecting on all reimbursable expenses at your property is apt to become more difficult than originally envisioned, particularly if you’re dealing with more than one property.  In theory, you should be able to send your tenants a list of your reimbursable expenses plus any relevant invoices, and receive a check in the mail for the amount you outlined. Sometimes, depending upon the lease, you may have to estimate these costs at the beginning of the year and have them pay in a monthly estimate and then true up to the actual expenses at the end of the year. In other situations you may send them invoices as they arrive, it all depends upon the lease. Seemingly minor issues can get in the way and greatly complicate this process. 

(To search across all ALM blogs, go to www.Lexis.com.)