What is a Net Lease?
The differences between single, double and triple.
2.7 min read
Before leasing commercial property, it is essential to consider all of your options and the best fit for you and your business. There are various types of lease agreements for commercial real estate properties. It may be hard for those who are not experienced in commercial real estate leasing to keep track.
Luckily, we are explaining the most common type, the net lease, and the three types.
Net lease (N)
So what is a net lease? This commercial real estate lease is a contractual agreement that allows the tenant to typically pay for one incidental expense directly, such as taxes, insurance fees or maintenance costs. A single net lease is not as typical in the commercial real estate world, as the landlord is responsible for most potential risks associated with the property. In a single net lease, the tenant typically pays a lower rent cost as they are responsible for paying the added fee of property taxes.
Double net lease (NN)
On the more popular side of net leases, the double net lease is a type of commercial real estate lease, under which the tenant pays property taxes and insurance premiums in addition to the rent. In most cases, the base rent tends to be lower because of the additional expenses the tenant is responsible for undertaking. However, all maintenance costs remain the responsibility of the landlord.
Triple net lease (NNN)
A triple net lease is an agreement between the landlord and tenant under which the tenant is responsible for paying the base rent, property taxes, building insurance and utilities, and other operating and maintenance costs. In a triple net lease, the landlord assumes no expenses other than those for structural repairs. This type of lease is typically long-term and can last upwards of 20 years. A triple net lease is a low-risk investment for investors, as the tenant covers most costs associated with the property.
Knowing what type of lease agreement is on the table and the critical negotiables of your contract will give you the upper hand, helping you protect your client’s needs and your future business.
References
Hall, M. (2021, January 1). Single vs. Double vs. Triple Net Leases: What's the Difference? [web log]. https://www.investopedia.com/ask/answers/040115/what-are-differences-between-single-double-and-triplenet-leases.asp.
13 commercial leasing terms you need to know. BDC.ca. (2020, September 12). https://www.bdc.ca/en/articles-tools/money-finance/buy-lease-commercial-real-estate/13-terms-you-need-to-understand-before-signing-your-commercial-real-estate-lease.
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