Why can't renters be charged triple net similar to commercial leases?

[misher]

Doesn't seem crazy that renters aren't responsible for the costs placed on homeowners?

For those who don't know, triple net means that commercial businesses leasing a unit are responsible for property tax, maintenance fees, insurance, etc incurred by the unit being rented. Basically the costs of the unit get passed on to those using the unit.

A similar system would be very appropriate for rentals as it helps fix the profit margin for the rental owner. Say a rental owner is making a 5% profit and school taxes, maintenance, or property taxes go up. With the rental restrictions he may not be able to raise rent to cover this. With triple net, these costs get passed on to the renter so the 5% profit margin is almost always maintained. Hell if renters had to pay the costs to actually maintain the place and the taxes maybe they wouldn't keep voting to tax the rental Owners.

Does anyone know why we don't allow a triple net system for residential? To me I am surprised anyone gets into residential rentals given that profit margins are very unstable. You could be making a profit one day, a loss the next, and you couldn't kick out the tenant or increase rents to cover the loss.

If there was triple net, then renters would be much better prepared for home ownership should they wish to purchase a home. They'd also probably take much better care of the home to avoid someone being hired as the maintenance gets charged back to them?

Am I crazy to suggest this? Rather than increase rents I'd expect this to decrease them as then renters could compare the profit margins each place is charging and could work to decrease the rent by doing their own maintenance. This way the government could provide tax decreases to rental properties that get directly passed on to renters.


Triple net would help renters feel much more connected to their own homes. Allowing them to emphasize with the homeowner and treat the home better. The current system creates a homeowner versus renter conflict while a triple net system would help create a team both wanting to maintain the property at the lowest cost.

Triple net would help separate average rents into costs and profit margins. This would better allow BC to lower costs to help renters and with profit margins visible renters will be able to better choose a place to rent.

[djmk]

Because residential renters are also renting everything inside the unit like the carpet, toilet, kitchen etc.

Commercial tenants are only renting the shell. Inside the unit generally belongs to the tenant

Try replacing a roof with a triple net tenant and see what happens

[misher]

Originally Posted by djmk

Because residential renters are also renting everything inside the unit like the carpet, toilet, kitchen etc.

Commercial tenants are only renting the shell. Inside the unit generally belongs to the tenant

Try replacing a roof with a triple net tenant and see what happens

Well this idea mostly applies to strata condos. Also for smaller commercial they generally are stuck with the fixtures rather than doing their own.

[Klazu]

Boy, some of us are so out of touch with reality of being a tenant. As far as I can see, every rental on the market today is asking way above what the shithole is really worth, so the landlords have it good even with all the taxes they pay for their damn property.

[240glt]

^^^^^ good lord no kidding. As a landlord I want control over maintenance expenses and I set aside a portion of my net margin every month for that. I think charging tenants for maintenance or capital expenses would be a disaster. Most tenants pay their own utilities anyways so why would I want get in the middle of that ? If they don’t pay the power bill they can get the calls from the utility. Taxes are fixed costs and factored into the rent. Taxes go up $12 a month every year but It’s really not worth adjusting for that, especially if you have good tenants

Nothing’s broken, no need to fix it

[whatnext]

Exhibit A in why small-time condo "land barons" are a bad idea.

[Changing City]

Why are commercial tenants expected to pay triple net leases? If the property value doubles, they are expected to pay the higher taxes, but all the benefits of the increased value go to the owner. How is that fair? It must be a factor in the vacant retail units we see, and the businesses that close despite being seemingly successful.

[SFUVancouver]

Would TI inducements become part of residential leases? Could good tenants require landlord agreement to restrictive covenants on follow-on occupancy? Don't you dare rent to someone in my career field for 60 months after I leave.

Honestly, triple net is rent seeking in its most pure form, and as ChangingCity notes, it's absurd to burden commercial tenants with the full property tax impact of windfall property value appreciation. Plus, triple net creates a perverse incentive for property owners to invest as little as possible in their building's energy performance since they aren't paying for the consequences of poor insulation, wasteful HVAC, and the like. That's how we end up with hilariously poor performing buildings that try to heat and cool the great outdoors; the building owner doesn't care because they've externalized the costs while retaining all the benefits.

[misher]

Originally Posted by SFUVancouver

Would TI inducements become part of residential leases? Could good tenants require landlord agreement to restrictive covenants on follow-on occupancy? Don't you dare rent to someone in my career field for 60 months after I leave.

Honestly, triple net is rent seeking in its most pure form, and as ChangingCity notes, it's absurd to burden commercial tenants with the full property tax impact of windfall property value appreciation. Plus, triple net creates a perverse incentive for property owners to invest as little as possible in their building's energy performance since they aren't paying for the consequences of poor insulation, wasteful HVAC, and the like. That's how we end up with hilariously poor performing buildings that try to heat and cool the great outdoors; the building owner doesn't care because they've externalized the costs while retaining all the benefits.

Well there are clauses that limit maintenance fees, also larger tenants tend to invest in energy savings upgrades. Or sometimes they split the bill of upgrades with the Owner.