Roofs, HVAC systems, and plumbing don’t break on a schedule. For healthcare providers running homes in several locations, one unexpected replacement can strain a budget that was built around care, not construction. The best protection plans are built by maintaining each property consistently, setting aside money for the large repairs you know are coming, and understanding which costs your lease makes your responsibility. Choosing between a triple net vs. modified lease changes who pays for major repairs.
If you lease homes from Scioto Properties, you can choose between two lease types: a Triple Net (NNN) lease and a Modified (MOD) lease. This article explains what counts as a capital repair, how to budget for one, and how each lease type changes who pays.
What Is a Capital Repair?
A capital repair replaces or restores a major part of a property. Unlike routine maintenance, these repairs are infrequent and expensive. Common examples include roofs, HVAC systems, plumbing, electrical systems, foundations, windows, and siding.
Under a MOD lease, Scioto covers repairs that cost more than $500 in a single instance for the systems included in your lease package.
Why Deferred Maintenance Costs More Than Planned Repairs
Putting off maintenance can look like a way to save money, but small problems grow over time. A slow leak turns into water damage, and an HVAC unit that misses its servicing fails during a heat wave. Emergency repairs usually cost more than planned ones, and they leave little time to evaluate pricing from multiple vendors.
For care providers, the cost isn’t only financial. A failing system can put residents at risk, disrupt daily routines, and lead to problems during licensing inspections.
How Should Providers Budget for Capital Repairs?
The right amount to set aside depends on your lease terms, the age and condition of each home, and how many properties you operate. A few habits help no matter how many homes you have:
- Build an annual reserve for each property. List each home’s major systems, their age, and how many years each one has left, then spread the replacement cost across those years.
- Decide in advance where the money will come from. Providers typically pay for repairs from the operating budget, a dedicated reserve, or financing. Deciding ahead of time keeps you from pulling money away from care when something breaks.
- Smooth out large expenses. Grouping projects across several homes, or negotiating volume pricing with vendors, can lower costs and keep spending predictable.
- Review the plan every year. Update your estimates as systems age or as you add homes.
Capital planning is also part of a broader financing strategy for healthcare providers. Every dollar that doesn’t go to an emergency repair is growth capital you can put toward new programs or new homes. Some providers also free up capital by selling and leasing back the homes they own.
Who Pays for Capital Repairs Under Each Lease Type?
Your lease type decides who pays for major repairs. Under a Triple Net (NNN) lease, the provider covers them. Under a Modified (MOD) lease, Scioto covers certain larger repairs based on the package you choose.
Triple Net (NNN) Lease
The provider pays for utilities, maintenance and repairs, property taxes, property insurance, and general and professional liability insurance. Scioto pays no operating or capital expenses, so monthly rent is lower than under a MOD lease. An NNN lease suits organizations that want full control over their properties’ maintenance, insurance, taxes, and capital expenses.
Modified (MOD) Lease
The provider pays for utilities, routine maintenance and repairs, property taxes, and insurance. Scioto pays for repairs over $500 in a single instance, as long as they aren’t caused by negligence, on the systems included in your package. The provider still pays for smaller repairs, repairs to systems outside the package, and any damage caused by negligence. Monthly rent is higher than under an NNN lease, but repair costs are more predictable, and the lease works more like a standard rental.
What Do the MOD Packages Cover?
Each package sets which systems Scioto repairs when a single repair exceeds $500:
- Structural: roof, foundation, framing, windows, siding, doors, drainage, and other exterior and structural components.
- Mechanical: HVAC, electrical, full plumbing, septic, and wells/water treatment.
- Major Systems: roof, HVAC, electrical, and core plumbing (drain, sewer, supply lines, and water heater).
For the full list, download our Choose Your Lease Fit Guide.
How Lease Terms Support Long-Term Planning
Scioto leases start with a seven-year initial term and include two five-year renewal options. During the initial term, rent increases 2% each year, so you can project your rent costs for all seven years and build your repair reserves around a known number. Together with a capital plan for each property, that makes it much less likely a major repair will catch you off guard.
Frequently Asked Questions
What Counts as a Capital Repair?
A large, infrequent repair that replaces or restores a major part of a home, such as a roof or HVAC system. Under a MOD lease, Scioto covers repairs over $500 in a single instance for the systems in your package, as long as the damage isn’t caused by negligence.
How Much Should a Provider Set Aside Each Year?
It depends on your lease type, the age and condition of each home, and how many properties you operate. A plan that tracks each major system and its remaining life gives you the most accurate number.
Who Pays for Roof Repairs in a Leased Home?
Under a NNN lease, the provider pays. Under a MOD lease, Scioto covers roof repairs over $500 in a single instance if your package includes the roof, and the damage isn’t caused by negligence. The Structural and Major Systems packages both include the roof.
What’s the Difference Between a NNN Lease and a MOD Lease?
An NNN lease gives providers more control and lower rent in exchange for paying all property costs, including capital repairs. A MOD lease has higher rent but shifts certain repairs over $500 to Scioto, which makes costs more predictable.
Why Partner with Scioto
For more than 25 years, Scioto has partnered with providers who serve people with intellectual and developmental disabilities and traumatic brain injuries. Today, our portfolio includes more than 2,200 properties across 46 states. We’ll help you choose the lease that fits your budget, your homes, and your growth plans. Contact our team to start the conversation.