There are many types of leases that can be structured for the leasing of real property.  The type of lease that is appropriate for any given transaction will depend on the parties’ objectives, financial strength, long term or short term intentions for the property and the management skills of the landlord.  One of the structures often used by landlord who do not have management capabilities or who desire to simplify and take the risk out of leasing is the triple net form of lease.

In triple net leases, generally, the tenant is required to pay for the utilities, taxes, insurance and maintenance.  This form of lease is often favored in sale-leaseback deals.  While it may be clear that the tenant has responsibility for payment of the real estate taxes, questions can arise as to rights and responsibilities of the parties related to disputes over taxes.

Let’s say that the real estate taxes assessed against the leased property are too high in the opinion of the landlord and/or tenant.  Both have a vested interest in keeping the taxes down.  By doing so the tenant saves money and the landlord prevents precedent for higher valuations in the future.

Many leases, however, fail to address the issues related to legal challenges made to a valuation deemed to be too high.  For example:  what rights does tenant have to challenge or appeal the assessment?  Is the tenant required to get the landlord’s approval to file an appeal or lawsuit disputing the taxes?  Does the landlord have the right to approve any settlement?  What if the landlord and tenant cannot agree on the terms of any settlement?  If there is a refund, who is entitled to the refund?

Leases can become long and laborious and many times the landlord and the tenant resist lengthy forms of leases.  Of course, its best to be cautious and not be overly verbose in lease drafting.  However, it is important to cover critical issues such as the rights and obligations of the parties related to real estate taxes imposed on the property subject to the lease.  As usual, while the tenant or landlord may not see the necessity of addressing such issues, they will surely thank their counsel when such an issue arises during the term of the lease.

– Rulon D. Munns, Esq., is a managing shareholder of Bogin, Munns, & Munns, P.A., a full service law firm with offices in Orlando, Clermont, Kissimmee, Deltona, Daytona Beach, Ocala, Melbourne, Gainesville, and Leesburg, Florida.  He welcomes questions and comments regarding the above and can be reached at rulon@boginmunns.com.

NO LEGAL ADVICE: This blog entry is not intended as legal advice nor should you consider it as such. It is intended only as general information.  You should not act upon this information without retaining professional legal counsel. Please keep in mind that merely subscribing to or reading this blog or otherwise contacting Bogin Munns & Munns, P.A. in the manner that you have will not establish an attorney-client relationship with our firm. Bogin Munns & Munns, P.A. cannot represent you until the firm knows there would not be a conflict of interest, and the firm determines that it is otherwise able to accept the engagement.

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