NC residential equivalent of a NNN lease?

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NC residential equivalent of a NNN lease?

Victor Yang
Member since 2025 · 4 posts · 3 votes

[NORTH CAROLINA] 

Hello,

Is there a way i can create a lease for just the land, but not the house, or have a NNN residential equivalent?

Context, i bought a house at a foreclosure auction. I mainly bought it for the land, do not intend to rent it out for cash flow or what not.

It is currently occupied by the previous owner. Instead of evicting them, i was thinking is there some way that I could rent it back to him for very cheap (mainly to cover just the taxes/ insurance) ie 2k a year rather than the going rate of 2k a month for similar properties. However, i dont want him to be able to sue me for "the water heater isnt working" "the ac isnt working etc..."

Also I dont know the state of the house ie is it completely derelict and trashed or what not, as previously stated i dont care about the house, just the land. In all likely hood, in 5-10-20 years the house will be bulldozed completely. 

I think this arrangement can suit both parties, he wasnt going to be able to keep the house but can still live there for super cheap. Alternative is the sherif evicts him and I pay tax and insurance.

I know we can have a gentleman's agreement on these things, but im still afraid he might be able to legally sue me if we have a legitimate residential lease? I was thinking about something like an Estate At Will lease?

Thank you all

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Greg ScottPro Member
Rental Property Investor · SE Michigan · Member since 2014 · 4k+ posts · 6k+ votes
1y

Interesting idea, but I suspect that would create more problems than it is worth.

Most of the leverage you have with a NNN lease is that you are working with a company, presumably one that makes money.  If they do not meet their contractual obligations, they know you can sue them for the money.  Business owners won't want to get tied up in litigation and if there is a good chance they will lose, it is easier to simply follow the contract.

How would that work with a lower-end tenant?  Let's say the city cites them for violations and they rack up penalties and fines.  Theoretically you could sue them performance.  In reality, you are going to be the one to pay for that.  

Would you be able to evict if they don't pay the ground lease?  They may argue they couldn't pay you because they just made a $10,000 improvement to the house.  Many judges would feel you got paid even if no cash was sent to you.

I could see this potentially working on a higher-end property that it in excellent condition with a Grade A tenant.  I'm skeptical about it working in the situation you describe.
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  • Greg ScottPro Member
    Rental Property Investor · SE Michigan · Member since 2014 · 4k+ posts · 6k+ votes
    1y

    Interesting idea, but I suspect that would create more problems than it is worth.

    Most of the leverage you have with a NNN lease is that you are working with a company, presumably one that makes money.  If they do not meet their contractual obligations, they know you can sue them for the money.  Business owners won't want to get tied up in litigation and if there is a good chance they will lose, it is easier to simply follow the contract.

    How would that work with a lower-end tenant?  Let's say the city cites them for violations and they rack up penalties and fines.  Theoretically you could sue them performance.  In reality, you are going to be the one to pay for that.  

    Would you be able to evict if they don't pay the ground lease?  They may argue they couldn't pay you because they just made a $10,000 improvement to the house.  Many judges would feel you got paid even if no cash was sent to you.

    I could see this potentially working on a higher-end property that it in excellent condition with a Grade A tenant.  I'm skeptical about it working in the situation you describe.
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  • Adam SchneiderPro Member
    Lender · Raleigh, NC · Member since 2012 · 955 posts · 639 votes
    1y

    @Victor Yang

    Why are you not reaching out to a NC real estate attorney to draw up a document that spells out the agreement that you are looking to do with the tenant?

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  • Maranda TuckerPro Member
    Property Manager · Charlotte, NC · Member since 2022 · 152 posts · 118 votes
    1y
    Quote from @Victor Yang:

    [NORTH CAROLINA] 

    Hello,

    Is there a way i can create a lease for just the land, but not the house, or have a NNN residential equivalent?

    Context, i bought a house at a foreclosure auction. I mainly bought it for the land, do not intend to rent it out for cash flow or what not.

    It is currently occupied by the previous owner. Instead of evicting them, i was thinking is there some way that I could rent it back to him for very cheap (mainly to cover just the taxes/ insurance) ie 2k a year rather than the going rate of 2k a month for similar properties. However, i dont want him to be able to sue me for "the water heater isnt working" "the ac isnt working etc..."

    Also I dont know the state of the house ie is it completely derelict and trashed or what not, as previously stated i dont care about the house, just the land. In all likely hood, in 5-10-20 years the house will be bulldozed completely. 

    I think this arrangement can suit both parties, he wasnt going to be able to keep the house but can still live there for super cheap. Alternative is the sherif evicts him and I pay tax and insurance.

    I know we can have a gentleman's agreement on these things, but im still afraid he might be able to legally sue me if we have a legitimate residential lease? I was thinking about something like an Estate At Will lease?

    Thank you all

    This sounds too good to be true. Look up NC Tenant/Landlord Law. That will dictate what you can and cannot have in your agreement. For example,  providing a heating source for your tenant is your responsibility as the landlord. 

    Definitely consult an NC RE Attorney! Highly doubtful that there is a NNN lease equivilatent for residential properties. If there were, I know of a lot of landlords who would use them.

    806-685-1818
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