A Triple Net Lease is one that frees the investor or landlord from any property responsibility. It is diametrically opposite to a gross lease, i.e., one in which the tenant is only responsible for paying the rent and the utility costs and the landlord has to handle the rest. Under a triple net lease, the tenant bears all property costs in addition to their rent and utility costs.
What does a Triple Net Lease (NNN) Cover?
Under a triple net lease, the tenant has to bear the following costs:
- On-site property management and maintenance costs.
- Costs associated with property use and occupancy.
- Real estate taxes.
- Building insurance and improvement costs
What does a Triple Net Lease (NNN) NOT Cover?
It is often assumed that under a triple net lease agreement, the tenant is responsible for all expenses. However, that is not strictly true.
Under a net-lease, the tenant is not responsible for the following:
- The tenant is not responsible for covering the landlord’s accounting costs.
- The tenant is not responsible for handling the charges levied by the landlord’s attorneys while drafting the NNN documents.
Types of Triple Net Leases
There are three types of triple net leases found in net lease transactions:
- Bond-Type Lease (aka Hell or High Water): The tenant is responsible for roof, structure, etc, regardless of the condemnation or casualty.
- Absolute Triple Net Leases: The tenant is responsible for the cost of roof, structure, and parking.
- Double Net Leases: The landlord is responsible for the roof and structure.
The name of the specific leases may vary depending on the country and different finance circles. In all of the aforementioned net lease types, the tenant is — at the very least — responsible for paying all costs associated with the property use and occupancy, maintenance, and management.