Seller-Owned Real Estate Inspection / Diligence?

October 20, 2025

by a searcher from University of Pennsylvania - The Wharton School in Los Angeles, CA, USA

Hi all! We’re evaluating the purchase of a business where the Seller owns the real estate. The Seller wants to lease the property back to us under a triple-net (NNN) lease. For those who’ve been in this situation: - How did you diligence the real estate? (Did you get an inspection or rely on disclosures?) - What did you do if you discovered deferred maintenance or repair needs? - How did you negotiate who pays for what going forward under the NNN structure? Would really appreciate hearing how others approached this, especially any lessons learned or things you wish you’d done differently. Thanks in advance!

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Reply by a searcher
from Babson College in Bethesda, MD, USA

There are different lease structures that can be used but the most common is a NNN lease (as opposed to Absolute NNN or various lease structures with more LL expense responsibility). With a typical NNN lease, the tenant is responsible for real estate taxes, property insurance, repairs & maintenance, utilities and other operating expenses like snow removal or landscaping. Normally (not always) the landlord remains responsible for capital expenses. The way this is described in most leases is that the tenant pays for repairs and the landlord pays for replacements. The two big expensive items are usually the HVAC system and the roof. With a normal NNN lease, the tenant will pay for regular maintenance items, and the landlord pays if the roof or HVAC needs to be replaced. So, regarding your questions: I don’t know that you necessarily need to hire a third-party inspector. Conducting a walk-through and noting immediate repair needs is usually enough – for example, noting broken doors or windows. You can ask the LL, to repair small items like these before the lease starts. Also, ask how old the HVAC system is – if it is old, you may want to call an HVAC company and have them take a look. If there are deferred maintenance issues, ask the LL to fix them. Or, ask for a cap for your expense exposure (i.e., ask the LL to cover any cost exceeding $5,000 for example). Regarding negotiating who pays for what…as mentioned above, the tenant pays for operating expenses and repairs and the LL pays for replacements – that is generally the structure. You may want to have someone with lease experience review the lease to further discuss what can be negotiated.

Reply by an intermediary
from Northwestern University in Chicago, IL, USA

Make sure you get a right-of-first refusal or option to buy the real estate.

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