If you are a confused homeowner who wants to know more about commercial real estate, you may have heard about the term triple net lease (NNN). Chances are, you could’ve heard it while having a conversation with a broker, and he had discussed it, but at the moment, you didn’t understand. Or you thought, What is this? No need to be ashamed, as you aren’t alone in this.

However, in reality, it’s the most common lease in commercial property. Only in 2024, almost $1.7 billion worth of these deals are being sold to investors. Unfortunately, there are still misconceptions about it among landlords who deal mainly with residential rentals. Also learn One Big Beautiful Bill Act (OBBBA) and how it supports American manufacturing growth.

So the real question begins: what is a triple net lease, and why does it even matter? No worries, as this is what we’ve explained in detail. Keep reading till the end to have a full understanding of the topic.

What Exactly is a Triple Net Lease?

Triple Net lease, which is abbreviated as NNN, is a type of commercial lease in which the tenant doesn’t only pay the rent but also pays three other types of expenses, including:

• Property tax
• Property insurance
• Property maintenance costs

Now you do understand where the triple net name comes from.

Triple Net Lease (NNN) is quite common in commercial estates, especially for retail units, office buildings, and industrial spaces. This is also very common with the long-term lease agreements, in which tenants can have more hold as compared to landlords.

How Does a Triple Net Lease System Work?

Let’s explore how this lease works:

1. Calculation of Rent and Expense

Tenants must be able to pay their part of the building’s rent, including the base rent, too. This share is quite fair, ideally based on the leased space.

2. Organized Payment Structure

In this type of lease, tenants pay these costs directly to insurers, tax offices, and maintenance firms. This way, everything will be clear to both sides about how and what they have to pay.

3. Documentation is Mandatory

This lease always demands detailed paperwork. It includes mentioning the expenses covered by tenants, including the time as well. Lease experts can help with this process.

Benefits of Triple Net Lease for Landlords

There are a couple of reasons why landlords love this lease the most:

1. Stable Income

With this lease, landlords do have a fixed, dependable income. As tenants also handle the property costs, this means landlords will be enjoying the rental money without any extra spending.

2. Tax Advantages

Landlords can also reduce their taxes by deducting the property maintenance and tax expenses with this type of lease.

3. Offload with the Property Maintenance

The biggest perk is that landlords don’t have to pay for property repairs with these leases. This means they can save money and time by letting tenants take care of the maintenance.

Advantages of Triple Net Lease for Tenants

Not only landlords, but tenants also get a couple of benefits with this lease:

1. Control and Flexibility

With these types of leases, tenants do have the freedom to adjust or change the property. Spaces can be easily adjusted to the business needs without any hard rules.

2. Saving the Money

Tenants can also save money with a triple net lease (NNN). They can avoid the extra charges of taxation and insurance.

Disadvantages of Triple Net Lease

You may be happy to see the benefits of this lease for both tenants and owners. But hold on, as this lease does offer some drawbacks too. Let’s have a look:

1. Financial Risks for the Owners

Landlords can underspend on extras, minimizing their profits to keep up the property’s standard maintained. Unpredictable costs and property value drops are enough to make the lease not so profitable. This means you should check whether tenants are financially stable enough to deal with such risks or not.

2. Limitations with Ownership

If by any chance your tenant is able enough to manage the property on their own, you’ll have less say in daily decisions. Landlords have to trust the tenants to keep the place up to standard.

Never Overlook the Legal Considerations in NNN

You always have to keep an eye on the legal angles of the Triple Net Lease (NNN). This means you always have to add certain parts in the lease to keep both the tenant and the owner on the safe side.

Here are a couple of important clauses for this to be added:

• Maintenance of the Property: The lease should clearly state who is more responsible for maintaining the property. This means both parties should’ve a clear understanding of their roles in this regard.
• Insurance: You must decide the insurance details for what the owner and tenant must have. It’s necessary to keep both parties safe from risks.
• Default and Termination: This point is of great importance because, based on this, you can have assurance on when and how the lease can be cancelled. It should mention the deal-breaking or not delivering the rent on time.
• Resolving the Disputes: This aspect should state how the disputes are going to be sorted. It could be either via discussions, using mediation, or anything else.
• Indemnification: This important point ensures that one party will be covering the other if a bunch of problems arise during the lease.

How Can You Calculate the Triple Net Lease?

There are a bunch of ways you can calculate it, shown in the following table, to have a better understanding:

Flat Rent	In this scenario, the tenant has to pay a fixed amount every month.
Percentage Rent	Tenants can also pay a part of their sales in rent, including the flat rent.
Base Rent with the Escalation Clauses	Rent can start at a certain rate, but with time can get higher.

Final Thoughts

We hope your confusion regarding the Triple Net Lease has gone away after reading this blog. It’s not very complicated; however, it is a thorough topic to understand. It holds benefits for both tenants and owners. However, it also has a bunch of cons.

Although the most important aspect is adding the important legal considerations in this regard. This can be very advantageous for both parties. Lastly, there are a few ways you can calculate this lease.

For the best and most flexible lease options, look no further than 25 Van Zant. We offer commercial rental spaces in CT with flexible rental leases. Contact us today for more info!

Frequently Asked Questions

What’s the opposite of the Triple Net Lease?

The opposite of the Triple Net Lease (NNN) is the Gross lease. It’s the type where tenants won’t only pay base rent, but you’ll be paying for all the expenses related to the property.

What are N and NN in the leasing?

Basically, there are three types of net leasing:

• Single Net Lease (N)
• Double Net Lease (NN)
• Triple Net Lease (NNN)

What are some criteria for a lease?

The following are the five criteria for a lease:

• Bargain purchase option
• Transferring the ownership
• Economic life
• Net present value of lease payments
• Lastly, whether the asset is specialized or not

What are commercial real estate lease types?

There are 5 different types of commercial real estate leases, including:

• Gross Lease
• Modified Gross Lease
• Triple Net Lease (NNN)
• Absolute Net Lease
• Percentage Lease