Triple Net Leases (NNN): What Tenants Pay Beyond Rent
What Is a Triple Net Lease?
A triple net lease (often abbreviated NNN) is a commercial lease structure where the tenant pays base rent plus three categories of property expenses: property taxes, building insurance, and common area maintenance (CAM). The landlord receives rent "net" of these costs — hence the name.
In a triple net lease, the tenant bears most of the financial risk associated with property ownership, while the landlord collects a predictable income stream with minimal ongoing expense responsibility.
The Three "Nets"
- Property taxes: The tenant pays their proportional share (or all) of real estate taxes
- Insurance: The tenant covers building insurance premiums, often including liability and property coverage
- Common area maintenance: The tenant pays for shared expenses like landscaping, parking lot maintenance, janitorial services, and building repairs
Triple Net vs. Other Lease Types
- Gross lease: Landlord pays all operating expenses; rent is higher but all-inclusive
- Single net (N): Tenant pays property taxes only, in addition to rent
- Double net (NN): Tenant pays property taxes and insurance
- Triple net (NNN): Tenant pays taxes, insurance, and CAM
- Absolute net: Tenant pays everything, including structural repairs and roof replacement
What to Watch For
- CAM charge creep: Without caps, CAM charges can increase unpredictably as the landlord adds expenses
- Capital expenditure pass-throughs: Some NNN leases pass through major capital costs like roof replacement or HVAC systems, which can be enormous
- Audit rights: Ensure you have the right to audit the landlord's expense calculations
- Administrative fees: Some landlords add management fees on top of the actual NNN expenses
- Vacancy impact: In multi-tenant buildings, your share may increase if other spaces are vacant
When to Consult a Lawyer
Before signing a triple net lease, consider having a commercial real estate attorney review the expense definitions, caps, audit rights, and allocation methodology to avoid unexpected costs.
This article is for informational purposes only and does not constitute legal advice. Consult a licensed attorney for guidance specific to your situation.