In a standard NNN lease, the tenant pays for "maintenance and repairs." Sounds great, right?
But what happens when the 15-ton HVAC unit on the roof dies? A new unit costs $12,000. Is that a "repair"? Or is it a "capital replacement" that the landlord must pay?
If your lease is vague, you (the landlord) are writing that check. And there goes your cashflow for the year.
The Spearhead Standard Clause
We don't leave this to chance. We use a hybrid structure that protects the landlord while being fair to the tenant.
1. The Maintenance Contract
Tenant must maintain a quarterly service contract with a licensed HVAC vendor. Proof required.
2. The "Cap" on Repairs
Tenant pays first $500 of any repair per occurrence.
3. The Amortization Rule
If replacement is required, Landlord pays upfront, but the cost is amortized over the useful life (15 years) and billed back to the tenant as "Additional Rent" monthly.
Why This Matters to Investors
This structure converts a massive lumpy Capex hit ($12k) into a smooth, recoverable revenue stream.
It aligns incentives. The tenant wants to maintain the unit to avoid the amortization hike. The landlord is protected from paying for a new unit that the tenant will use for the next 10 years.
Real Estate is a game of inches. Winning on the HVAC clause adds 50 basis points to your IRR.
