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A Triple Net (NNN) Lease is a type of commercial real estate lease where the tenant on a monthly basis pays the base rent AND their pro rata share of the property’s operating expenses which include the taxes, insurance, and common area maintenance (CAM).
If the property is multitenant then each tenant pays their equal pro rata share of the NNN. In the event a tenant leases an entire building then they are responsible for 100% of the triple nets.
Understanding Triple Net Leases (NNN)
Triple nets are in addition to the base rent and are broken down into the following:
Property Taxes (Net 1)
The tenant is responsible for paying a portion or all of the property taxes associated with the leased space. This can be a significant expense, especially for commercial properties.
Property Insurance (Net 2)
Tenants are responsible for paying the cost of insurance coverage for the building. It’s important to note that this is different than the general liability and property insurance that they must also carry on their own.
Common Area Maintenance (CAM) Costs (Net 3)
CAM costs cover the maintenance and upkeep of common areas in a commercial property, such as parking lots, landscaping, and shared facilities. Tenants in a Triple Net Lease may be responsible for a proportionate share of these expenses, which can vary based on the tenant’s leased space.
Triple Net Leases are common in commercial real estate, especially for properties like office buildings, retail centers, and industrial spaces. These leases shift a significant portion of the property’s operational costs from the landlord to the tenant. This arrangement can benefit both parties; tenants have more control over the property, and landlords can predict their income more reliably. However, tenants need to carefully review the lease terms and understand the full extent of their financial responsibilities, as NNN leases can result in higher overall costs compared to other lease types.
