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What is a net lease for commercial properties?

On Behalf of | Nov 15, 2023 | REAL ESTATE LAW - Real Estate Law

Net leases are a staple in commercial real estate primarily because they delineate how operating expenses are divided between the landlord and tenant. Understanding what makes net leases a go-to for many commercial property agreements is beneficial for anyone looking into a lease.

Net leases come in several varieties, each with its distribution of financial responsibilities. Understanding these is crucial when entering into a commercial lease agreement.

Single net lease or N lease

Here, the tenant pays the base rent plus a portion of the property tax. The landlord covers the rest – building insurance and maintenance costs. This arrangement is relatively tenant-friendly but less common than its more inclusive cousins.

Double net lease or NN lease

The tenant covers the property taxes and insurance premiums in a double-net lease. The landlord typically handles maintenance expenses. This type of lease is more common and offers a more balanced split of costs.

Triple net lease or  NNN lease

The triple net lease is where tenants take on the most responsibility. They pay the base rent plus property taxes, insurance and maintenance. This can include anything from structural repairs to landscaping costs.

The saying “knowledge is power” rings especially true in commercial real estate. Net leases offer a world of opportunity and flexibility but come with their own set of complexities. Getting familiar with the ins and outs of net leases is a savvy step toward making informed real estate decisions.