Triple Net Lease

What is a triple net lease?

A triple net lease (NNN) is a form of landlord/tenant arrangement in which the tenant is responsible for not only the property’s rent and utilities but additional expenses as well, including things like property taxes and maintenance. This is also known as an absolute net lease in cases where all of the property expenses are the tenant’s responsibility.

With a triple net lease, the tenant is responsible for some or all of each expense connected to the property. This includes property insurance, building insurance, operating costs, real estate taxes, maintenance, and any other costs beyond the tenant’s base rent.

An NNN lease might seem to primarily benefit the landlord, as the majority of the financial burden associated with the property is assigned to the tenant. In some cases, though, a tenant might prefer this type of arrangement. 

Some landlords will provide for greater leniency regarding the modification of a property as part of a triple net lease. A long-term tenant might wish to renovate a part of their commercial space, for instance, and the terms of a triple net lease could allow for this sort of major update.

In other cases, the monthly rent on the property might be lower than normal to offset the additional costs associated with property taxes, maintenance, and insurance payments. This is more often the case when a landlord wishes to be more hands-off in the management of the property—the tenant is effectively autonomous in their occupation of the property, paying less in rent in exchange for taking on more responsibilities for upkeep.

FAQs 

What are the alternatives to a triple net lease?

Triple net leases are a popular choice in commercial real estate rentals, but there are other options if this sort of arrangement doesn’t suit your business. 

A double-net lease is similar to a triple-net lease but does not require the tenant to pay maintenance costs related to the property.

Another common lease type is the gross lease, in which the tenant pays higher rent prices but is not responsible for maintenance or any other property expenses. The tenant’s higher rent is meant to cover these costs, but the landlord is responsible for identifying and paying these items out of the rent money. 

There are also hybrid models for commercial leases, in which a tenant pays for only certain property expenses beyond rent or a percentage of the total expenses related to the property. These are sometimes known as modified gross leases.

Who should use a triple net lease?

Typically, a triple net lease is ideal for a landlord who wishes to remain mostly hands-off with their property and a tenant who wishes to have more autonomy over how the property is used and what it looks like.

Can I change from a gross lease to a triple net lease?

Yes, although it requires the consent of both tenant and landlord to change lease types before the existing lease’s term has expired. If both parties are agreeable to changing the terms, or the existing lease has expired and the landlord wishes to change lease types, the parties can negotiate new terms which shift the burden of property expenses to the tenant in exchange for greater control, lower rent, or both.