The vast majority of rental agreements in the Netherlands are concluded on the basis of the standard ROZ model rental agreement. In this, the landlord is responsible for taxes, insurance and major maintenance. However, we increasingly encounter the “triple net rental agreement”. In this article, we explain what triple net entails and what the advantages and disadvantages are for a tenant.
As mentioned, this is the most commonly used model. The tenant pays rent, takes care of minor and daily maintenance (think of a leaking tap and a squeaky door). The major costs, such as insurance, property tax and major maintenance, are for the landlord. The tenant therefore has relatively little to worry about. In many cases, even minor maintenance is arranged by the landlord and is settled via the service costs.
With the triple net agreement, the tenant not only pays the rent, taxes and insurance, but also all maintenance costs. And by ‘all’ we really mean everything: from the roof to the foundations, from air conditioning to elevators. If the building falls apart, the tenant has to solve it.
Triple net rental is more common in buildings that have been developed specifically for the tenant. This mainly concerns distribution centres, logistics hubs and production halls. Or in buildings that have been sold via a sale-and-leaseback construction. The tenant, who is also the former owner, usually knows how the maintenance is arranged and can therefore better oversee certain risks.
Then there are also the single net and the double net lease agreements, but you hear little about these in the Netherlands. With the single net lease agreement, the tenant pays not only the rent but also the owner’s taxes, such as property tax and sewage charges. With the double net lease agreement, the insurance costs are also paid by the tenant. In both cases, the landlord is still responsible for the major maintenance.
The English also have the “full repairing and insuring lease”: the tenant then pays the rent, all maintenance and insurance, and the so-called business rates, or property tax. Finally, the Germans also have the Dach und Fach lease agreement: The landlord pays for the maintenance of the roof and the construction and the rest is at the expense and risk of the tenant.
Because you, as tenant, take over the risks, the basic rent is often priced more attractively. But you do get the costs and risks of major maintenance, insurance and taxes in return. In order to be able to judge whether that lower rent is worth it, you will have to estimate very accurately what additional costs you will then have to pay.
You are the boss of the building. So you no longer have to be annoyed by slow landlords and managers or mediocre maintenance parties. You decide who, what, when, and how — provided you adhere to the agreed quality standards, of course.
Broken roofing, asbestos removal, collapsing facades — everything is your problem and your expense.
Some major maintenance work may be due just at the end of the lease term. While you as a tenant can only enjoy that new roof for a short while, the landlord will benefit from it for years after the lease has ended.
At the end of the rental agreement, there is a greater chance that you as tenant and landlord will not agree on whether the rented property has been delivered correctly. In other words, whether you as tenant have sufficiently fulfilled your maintenance obligation. A long aftermath can then follow, in which (independent) experts must be involved to settle it. So you will still have to worry about it for a while, while you as tenant have already moved into the next property. And as long as the property has not been delivered to mutual satisfaction, your valuable bank guarantee is still tied up.
Terms like “shell & core” or “turnkey” are nice, but vague. Be specific. Use floor plans, demarcation lists and technical specifications. Everything that falls under ‘the rented property’ also falls under the maintenance obligation. So let there be no ambiguity about that.
Before you sign, you must forensically examine the property as if you were going to buy it. Do a zero measurement (for example with NEN 2767) and record this. This will prevent you from being responsible for defects that were already there. If you fail to do so, the ‘lower’ rent could cost you dearly later.
Draw up a multi-year maintenance plan (MJOP) and have it updated annually based on NEN 2767 inspections. This way you won’t be faced with any huge surprises and you also give your landlord the confidence that you are carefully complying with the agreements.
Not only the costs for maintenance, taxes and insurance are yours as tenant with a triple net rental agreement. You also have to arrange everything yourself. And you may not have the right expertise for that. There is more to the maintenance of business premises than the maintenance of your own home.
If you are considering a triple net rental agreement as a tenant, then this is practically only possible if you are renting an entire building. Are you renting a building with multiple tenants and are you jointly responsible for major maintenance? That is asking for trouble.
In the case of a triple net rental, the landlord will want to be included as a beneficiary in the policy of the building insurance. Or that he takes out the insurance himself and you as the tenant pay the premium. And that while you as the tenant have the obligation to rebuild the rented property. Make sure that you are also a beneficiary of the building insurance, or that you have your own policy with the approval of the landlord. Is the insurance in the name of the owner? Then make sure that you have a lien on any benefits.
In a standard rental agreement, a bank guarantee of three months’ rent, service charges and VAT is usually sufficient. However, if you have more obligations as a tenant, a landlord will want a higher bank guarantee or additional securities (such as a maintenance reserve). For the tenant, a higher bank guarantee means that the bank will secure a larger part of your company’s working capital.
In addition to the fact that a higher degree of certainty can affect your working capital, it makes your cashflow less predictable. You may pay a lower rent (if all goes well), but the costs of maintenance can fluctuate enormously from year to year. In order to avoid surprises, it is therefore wise to budget well and make accounting provisions.
Where you can use a model agreement from the ROZ as a basis for a standard rental agreement, a triple net rental agreement is truly customised. You will have to look very carefully at all aspects mentioned above on a case-by-case basis and cover the associated risks.
It should be clear that the advantages of a triple net agreement are mainly for the landlord: it does get a lower rent, but it also does not have a significant part of the costs and the hassle. The rent comes in every quarter and it does not have to worry about it.
And the tenant? Provided that you really know what you are getting into and have the knowledge, skills and capacity to arrange it properly, you can perform the maintenance in the way and with the suppliers that you want. That can be useful if you have a very business-critical operation, but think before you start.
