Tenant paid no security deposit to previous LL. Is this good investment for prospective buyer?

A buyer decide to purchase a income producing ,single tenant, NNN property at good location and finds out that no security deposit has been paid by tenants to the LL and it is fine by the LL. Is this a common practice in commercial leasing? What happens if tenant defaults or damages property? What is your opinion, should the buyer move ahead with the purchase or look for something else or this is not a big issue?
Thank you
Rash.
In Buying Property - Asked by Rashida N. - Mar 4, 2009
Report Abuse
Answer this Question

Answer(s)

William G.
Broker/Agent
Scottsdale, AZ

Rashida, this is not common normal situations vary from market to market but a security deposit is a must on any nnn lease situation from the LL point of view. The fact that they have no records of deposits being paid may be one of two things either they collected security deposits and cannot account for them or worse they have no deposits in which case your buyer may be stuck with major expenses for evictions and or unit repairs on expired leases. If the NNN tenants are major players, Public Companies or government agencies you can recover damages based on lease provisions in court, if they are small companies find another opportunity, there are plenty to choose from.

Mar 5, 2009
Report Abuse
Gregory G.
Broker/Agent
San Francisco, CA

Who is the tenant?

Mar 9, 2009
Report Abuse
Tai L.
Broker/Agent
San Diego, CA

Maybe there's some relationship in place...who knows.

May 22, 2009
Report Abuse

Welcome to Answers

LoopNet Answers is where the commercial real estate community shares what they know to help each other out. And it's all for free.

Ask a question to get advice from brokers, investors, professionals and local experts.

Answer questions to raise your visibility as a trusted advisor and build new relationships.

Ask a Question

Post Question