What is a NET, NN, or NNN Lease?

When you're looking for a new place to rent for your office or business, it's important to know what type of lease you're getting into. If you're a business owner, then you've probably heard the term "net lease." But what does that mean? A net lease is an agreement between a tenant and a landlord in which the tenant agrees to pay some, or all the costs associated with owning and occupying the property. Net leases are typically used for commercial properties, and there are three main types: single net, double net, and triple net. In this blog post, we'll go over what each of those terms means and give you a few examples of when it might make sense to enter into a net lease agreement.

1. Single net lease

Also known as net or N leases, the specifics of a single net lease require the tenant to pay property taxes and rent. This type of lease involves the least amount of risk for the tenant, who pays property taxes through the landlord. This way, the landlord can verify that tax payments are accurate and timely. Tenants with this arrangement typically pay a lower rent than a standard lease due to the added costs.

2. Double net lease

In this type of lease (commonly known as net-net or NN), the tenant pays for the property taxes and insurance premiums. They are the most common type of lease in commercial real estate. The rental fee is lower due to the higher associated costs. Landlords are responsible for any maintenance fees related to the property. Like the single net lease, landlords usually require the tenants to pay the property taxes and insurance premium directly to them so they can verify payment and distribute funds to the appropriate places.

3. Triple net lease

Also known as a net-net-net lease, an NNN agreement means the tenant pays rent and all additional expenses. Landlords have the least amount of responsibility in these agreements because, in addition to the rent, tenants are paying for property taxes, insurance premiums, and costs related to maintenance. Base rent is less for this reason. Tenants who find that they are paying higher than expected maintenance costs often try to terminate the contract. Landlords often set up bondable net leases for this reason, which cannot be modified until the contract expires.

4. Modified net lease

Any net lease that has special conditions is a modified net lease. It is the hybrid of a traditional (gross) lease and a triple net lease. Modified leases are most common in the retail or industrial sectors or other properties with multiple tenants. Tenants looking to avoid the costly obligations of a triple net lease often create special terms with their landlords that satisfy both of their needs. For example, they may choose to share costs related to the operation and maintenance of the business.

Need help negotiating a lease? The answer is almost always, "YES!" Going into a negotiation with a building owner or management company without good commercial representation is like going into a courtroom without a lawyer! Contact us before the negotiations begin to allow us to help you negotiate your lease or purchase terms!