Triple Net (NNN) Lease
A structure where the tenant pays base rent plus property taxes, insurance, and maintenance.
01
What It Is
In a triple net lease the tenant pays base rent plus the three "nets" — property taxes, building insurance, and maintenance, including common area maintenance. Base rent is quoted lower than gross rent because those costs sit outside it.
Triple net structures are common in retail, industrial, and single-tenant properties, and they are the default assumption in much of the investment market.
02
Why It Matters
For a tenant, the quoted rate is only part of the story. A property advertised at a low NNN rate can carry a total occupancy cost well above a higher gross quote once taxes, insurance, and CAM are added.
For an owner, triple net structures shift expense inflation to the tenant, which stabilizes net income and generally supports value — one reason lease structure influences a property's worth as much as square footage does.
Reconciliation matters on both sides. Most NNN leases collect monthly estimates and then true up to actual costs annually, so a year with a reassessment or a major repair can produce a meaningful catch-up invoice.
03
Common Misconceptions
- "NNN rent is the cheapest option." The base rate is lower; the total occupancy cost may not be.
- "Maintenance means everything." Structural elements, roof, and foundation are sometimes excluded — but only if the lease says so.
- "Estimates are what I will pay." Annual reconciliation adjusts to actual expenses, up or down.
04
Questions to Ask
- What are the current per-square-foot estimates for taxes, insurance, and CAM?
- How have those charges moved over the last three years?
- Are capital expenditures, roof, and structure excluded from my share?
- How is my pro-rata share calculated, and does it change with vacancy?
- When does reconciliation occur, and can I review supporting documentation?
05
Related Reading & Resources
The most successful real estate decisions often involve collaboration between several professionals working toward the same goal. Understanding each person's role helps you ask better questions and make more confident decisions.
06
Other Lease Terms
- Gross LeaseA lease where the landlord pays most or all operating expenses and the tenant pays a single, predictable rent.
- Modified Gross LeaseA middle-ground structure where landlord and tenant split operating expenses in a negotiated way.
- CAM ChargesThe shared costs of operating and maintaining areas all tenants use, billed as a pro-rata share.
- Letter of Intent (LOI)A preliminary document outlining the main business terms before a formal lease is drafted.
- Tenant Improvements (TI)Modifications made to a space so it fits the tenant's use, and the negotiated question of who pays.
- Percentage LeaseA retail structure where rent includes a base amount plus a percentage of sales above a threshold.
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