Your Guide to Triple Net Leases

Triple net leases are a type of lease that is unlikely to be found in residential leases. They find the most use in commercial leases, where they can be very advantageous for all parties involved. 

What is a Triple Net Lease?

A triple net lease is a type of lease in which the tenant takes on financial responsibility for building maintenance, insurance, and real estate tax on top of rent. This means that the tenant is on the hook for most of the liabilities surrounding the property and a landlord incurs less risk.

There are single net and double net leases as well. Single net leases are when the tenant pays for the property tax in addition to rent and utilities. Double net leases are when the tenant pays for property tax, insurance, rent, and utilities.

Before jumping on the triple net lease train to avoid repairs and maintenance, check if you are actually responsible for some repairs. Some repairs are typically handled by tenants, click here for more information.

NNN Meaning

When someone says NNN lease they are referring to a triple net lease. NN and N refer to double and single respectively. Each N stands for ‘Net’ in reference to what the tenant pays for. 

The tenant pays for the net property tax, net insurance, and net maintenance. The net just means the tenant pays for all of the costs surrounding those three aspects. 

Pros and Cons of Triple Net Leases

Just seeing how much the tenant is responsible for may make you think “What tenant would ever want that?”. For any residential property that would be a great point, but for commercial properties it can be advantageous for the ‘tenant’ (company).

Pros:

• It allows greater control over the property for the tenant.
• The tenant can save time by handling the maintenance and insurance themselves when and if something goes wrong.
• For the landlord, much less responsibility and risk associated with the property. For more information on NNN lease insurance and risk, click here.

Cons:

• For the tenant it can be more expensive and time-consuming to handle all of the building expenses yourself.
• For the Landlord, they will receive less in rent because they aren’t going to be compensated for the service of handling all property matters. 

Conclusion

Triple net leases have a multitude of benefits and drawbacks, but it is up to you to decide if that model will benefit you, your lifestyle, and your tenants.