“Triple Net Leased” is a term that is thrown around a lot in the real estate world. This article will define this term, and discuss the benefits of owning such properties.
First, I will need to define some real estate lingo.
Many commercial leasing terms exist to describe who pays the property’s expenses. Who pays which, and how much, of those expenses is all spelled out in a tenant’s lease agreement. Three ways to describe commercial leases are:
1. Gross lease, 2. Modified Gross (or Net) Lease and 3. Triple Net (or NNN) Lease.
A gross lease is the easiest to understand. Under this lease, a tenant pays rent only, and the landlord pays for all utility bills, insurance, and property taxes. A modified gross, (sometimes called a “Net”) lease is one where a tenant will pay some expenses. For example, an apartment building that has electricity separately metered to the units is charging modified gross rents. Tenants pay their electricity bills, while the landlord pays everything else. (Water, gas, sewage, garbage, maintenance, and insurance – to name a few.) Triple Net describes leases where the tenant pays all of the expenses previously mentioned. In fact, the name “triple net” is an abbreviation for the term “Net taxes, Net insurance, Net maintenance.” Note that the term “double net” is sometimes used to describe leases. This means that the landlord, not the tenant, is paying one of these bills.
I could write an entire article on the differences between commercial leases, but this article focuses on properties that are triple net leased to credit tenants, so I will focus on that topic. The previous summary will have to do for now.