My tenant wants to pay the taxes directly. Does that make it a net lease?
This is a small thing next to what usually gets posted here, but it's sitting on my desk this week and I'd rather ask than guess.
I own a four unit and a two unit, both ordinary residential leases, and I've been reading about NNN because the idea of collecting rent and doing nothing sounds like a rest I could use after this year. Then something landed in my lap that made the two topics touch.
The two unit has a ground floor commercial space, a little insurance office, that came with the building. Their lease is a one page thing the prior owner wrote, base rent 1,150 a month, no escalation, month to month after the first year and we're well past that. Last week the tenant emailed and asked if she could just pay the property tax bill on the commercial portion directly and take it off the rent, because she says her accountant prefers it.
I don't know what to make of that. The building is one parcel with one tax bill covering all of it. There's one insurance policy on the whole structure and one furnace serving both floors. So there's no clean way to split any of the three items that make a lease net, as far as I can tell.
What I'm actually unsure about is whether this is a reasonable ask I should figure out how to accommodate, or whether it's a sign she wants a longer term and a better structure and doesn't know how to open that conversation. And whether a mixed building can ever really be net leased at all.