Triple Net Lease Explained: Everything You Need to Know
A Triple Net Lease (also known as NNN Lease) is one of the most popular leases in commercial property real estate, where landlords are looking for a steady and predictable cash flow. A Triple Net Lease is a form of real estate lease agreement where the tenant or lessee is responsible for all the ongoing expenses for that property in addition to paying the rent for the property. With this type of lease, the tenant is responsible for all the expenses associated with the maintenance of the property and takes all the unknown risks associated with the investment on the property. Triple Net Lease is also referred to as NNN Lease or Triple-N or simply written NNN.
There are three types of Net leases in the commercial real estate industry:
Single Net Lease:
In a Single Net Lease (also referred to as Net or or N), the tenant is responsible for paying the real estate taxes on the property. The property owner takes care of insurance and maintenance.
Double Net Lease:
In a Double Net :Lease (Net-Net or NN), the tenant is responsible for both real estate taxes and the cost to insure the building. In this lease, the landlord is only responsible for maintenance.
Triple Net Lease:
In a Triple Net Lease (Triple-Net or NNN), the tenant is responsible for property taxes, building insurance, and maintenance costs associated with the property. The fact that it covers property taxes, insurance, and maintenance - all 3 types of expenses - makes it Triple Net. The tenant pays all these types of expenses in addition to the basic rent and utilities for the building. This is in comparison with a “gross lease”, where the the landlord is responsible for these instead.
Since a Triple Net Lease requires so much of the tenant, they tend to have a lower rent because the tenant assumes all the ongoing expenses for the property. In general, triple net leases are most often used for freestanding commercial buildings and typically with a single tenant even though it could be used in other situations also. It is common for NNN Leases to have an initial term of 10 years or more with annual rent increases that are pre-determined in order to preserve the landlord’s income stream over time.