Can California Commercial Landlords Charge Tenants for HVAC Repairs in a NNN Lease?

If you're a California landlord with commercial properties under a million square feet, you might wonder, "Can I charge my tenants for HVAC repairs under a triple-net (NNN) lease?"

The quick answer is yes, generally you can, but it greatly depends on how clearly your lease is structured. Let's break this down in simple terms so you can protect your investment and avoid tenant disputes.

What Exactly is a NNN Lease in Simple Terms?

A triple-net lease in California means your tenants are usually responsible for three main expenses: property taxes, insurance, and maintenance. However, it's important to clearly define what counts as maintenance, especially for HVAC systems, to avoid any confusion.

Charging HVAC Repairs to Tenants: What's Allowed?

Yes, typically HVAC repairs can be charged back to tenants under a NNN lease, but it depends on what your lease specifically says. It's crucial to clearly outline this responsibility from the start.

Important Things to Consider When Charging for HVAC Repairs:

Clearly state in your lease who handles HVAC maintenance and repairs. Repairs are generally something you can charge back to tenants. However, larger projects like replacing or significantly upgrading the system are usually your responsibility unless stated otherwise.

Additionally, California has specific rules about HVAC maintenance and efficiency, so it's wise to check local regulations.

How to Make Your Lease Clear and Avoid Problems:

Your lease should clearly specify how often HVAC maintenance needs to happen and define exactly what is considered a repair versus a replacement. Also, include who is responsible for larger capital improvements and require tenants to promptly report any issues they notice.

Here's a Simple Example: Let's say you have a 50,000-square-foot retail property. The HVAC system needs a compressor repair. If your lease clearly says your tenants handle HVAC repairs (but not full replacements), you can confidently ask your tenant to cover this cost. Clear wording helps both you and your tenants understand expectations clearly.

It's best to have detailed, easy-to-understand lease agreements. Regularly inspect your HVAC systems, maintain open communication with tenants, and keep thorough maintenance records. Doing these things makes everyone's life easier and keeps disputes to a minimum