Bought NNN property with agent's false information, Any remedy?

I was looking for NNN property. The seller's flyer said, absolutely NNN property, I bought it and became the landlord. Three months after closing, the properties association in the area sent me a bill, association management operation charge, which had always been paid by former landlord, not the tenant, and want me to pay this fee. The closing attorney and my agent never discuss this fee with me before closing or after closing, and the Agent was even puzzled by this fee. Is there anything I can do?
In Buying Property - Asked by ling C. - Jun 29, 2012
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Answer(s)

Tom A.
Owner/Investor
Laguna Niguel, CA

if is a NNN property ,the tenant will pay for the association fee.

Jun 30, 2012
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Rosa B.
Broker/Agent
New York, NY

Im not sure about other juridictions, but in NYC, NNN (Triple net lease) is industry speak for Tenant taking responsibility for absolutely every expense. But, make sure you price your new asset correctly. NNN tenants should pay an advantageous (low monthly rent) below market rent for the privilege of doing whatever legal development of the space for any compliant use; with the low rent, it is understood and described in the lease, all expenses they will be responsible for, including block association, or community fund assessments. Or if you decide you gain something as a Landlord by paying and belonging/participating in the association (I think so), then you pay it, and pass this cost along in the monthly rental price. Of course you must seek legal counsel and get yourself an exclusive agent with experience in such transactions.

Jun 30, 2012
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Gregory G.
Broker/Agent
San Francisco, CA

Ling C.,
Who is the tenant?
-
Gregory Garver - Commercial Real Estate Broker
Broker License# 01716531
(415)225-9894
gregory.garver@gmail.com
Web Reference: http://www.nnnbrokersusa.com

Jun 30, 2012
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Chris R.
Broker/Agent
Denton, TX

Certainly a review of the langauge of the leases will dictate what all expenes can be passed through to the tenants from the Landlord. As with other NNN expenses - the Landlord will receive and pay the bill for expenses (taxes, maintenance, insurance, utilities, etc.) and then include those epxenses permissable when the accounting is reconciled at the appropriate time (calendard year or such) and tenants are giving an accounting compared to what they have been paying in order to true up the accounts. If the property you purchased had an obligation for an owner's association - it would seem the title company would have picked up on it in order to make sure all fees were paid to date of closing.

Jul 2, 2012
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John B.
Broker/Agent
Greenwood Village, CO

The specific obligations of the tenant should be outlined in the NNN lease including common area maintenance (CAM) expenses. NNN stands for rent Net of Taxes, Net of Insurance and Net of CAM. Refer to the lease for the your answer.

Jul 2, 2012
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Mike A.
Broker/Agent
Modesto, CA

It may still be NNN; but you still have to invoice the tenant for the owners association fees...I would just send the invoice off to the tenant--making the assumption the agent and your attorney were making correct representations.
the OA bill goes to you, not the tenant. It's your job to invoice it or your property manager.

Jul 2, 2012
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jean c.
Property/Asset Manager
Middletown, NY

two things: if this fee is killing your profit marging to the pocrint of falling into the negative, figure out an exit strategy.
in the other option is to ride it out for a few years while increasing the rent and refinance the building to a lower interest rate and morgage. Get a second building with a greater profit to back the previous one..Do not get dis courage every mistake made toward a goal is a step toward success. AND Please remember,due diligence! check and double check each deal.

Jul 6, 2012
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ling C.
Owner/Investor
West Columbia, SC

Thanks to all of you who shared your thoughts with me. First, Seller's flyer showed ABSOLUTE NNN and the CAP rate showed the NNN rate not deducting the operating expenses . NOI report showing there is Operating Expenses had been deducted that meant landlord had to pay. Since I know I won't be able to review lease thoroughly,and I paid a lot of legal fee hired a closing attorney to help me review the lease. It seemed the closing attorney missed a significant amount of monthly property management fee that I have to pay and she did not clear with the management association on any unpaid expenses. It took the property management association two and a half months to locate me, the new owner. Is my closing attorney liable for this mistake?

Jul 7, 2012
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Neil S.
Owner/Investor
Mentor, OH

Seconding one of the responses below, part of the due diligence process is determining what the buyer is actually getting in their purchase. Certainly with a net-lease investment one is buying not only the physical land & improvement but also the expectation of a certain income.
I have found that it is necessary, irrespective of the language in marketing materials, to find out what the specific terms mean to the specific owner/landlord, i.e., triple net may mean absolute triple net to some landlords while to many tenants, despite the term "absolute triple net" may have carve-outs such as structural, parking areas, et al, that the landlord is responsible for. (Also, most sellers' and brokers' marketing materials will have disclaimers that indicate that, in effect, it is up to the purchaser to investigate the property and not rely wholly on marketing materials.)
My recommendation would be to review the lease document and determine if this cost is addressed and if not, determine from the prior owner, how has it been handled in the past.
Many of us have had landlords and tenants bicker over HVAC maintenance, especially if the lease outlines that the landlord is responsible for replacement and the tenant for repair. In such a case the landlord will delay the replacement and try to convince the tenant it needs repair while the tenant will take the opposite stance. Another category that often causes conflict if not spelled out precisely in a lease are capital items versus operating items.
Ideally, these are elaborated in the lease document so as to reduce ambiguities.
I hope this is helpful.

Jul 8, 2012
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Investors Commercial Realty Group LLC ;.
Broker/Agent
Ambridge, PA

If I undertand the situation correctly.
I don't understand why you would owe the management company anything unless you hired them? If you did not hire them they have no contract with you. As far as who has liablity I know you feel burnt by the attorney who managed the transaction for you but, it would seem you need to contact an attorney to see. I am not in favor of being "sue crazy ". Sometimes we need to chalk it up to leasons learned. If there was misrepresentation most likely an agreement can be reached between all parties involved. If not you may need to have a different attorney review the facts to see if a suit is in your best interest.

Jul 9, 2012
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Daniel D.
Corporate Investor
Chicago, IL

Honestly the best advice you can get from everyone here is have an independent attorney look at the entire transaction, all documents, closing, title, etc and tell you what your rights are. It's worth the couple of hundred dollars to get this consultation rather then potentially doing something that can get you sued or cost you money by paying a bill you don't owe.

Jul 15, 2012
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Chris S.
Broker/Agent
Coeur D'alene, ID

1. Contact your attorney
2. You should have done more due diligence.

Aug 1, 2012
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