What is a triple net lease in commercial real estate? Here’s what it is and what its benefits are.
In commercial real estate, there are different types of leases that one can agree to sign. One of the more common types of agreements is the triple net lease, also known as NNN. Below we shall discuss what a triple net lease is and its benefits.
What Is a Triple Net Lease?
A triple net lease is an agreement between the landlord and the tenant concerning the three “nets” or “N”s of the commercial real estate world in the United States. The three Ns are:
- Property taxes: to cover the applicable land and buildings
- Property insurance: to cover unforeseen repairs
- Property maintenance: to keep the land and buildings in decent condition
In a triple net lease, the tenant shares the payment for these expenses besides paying for their own rent and utilities. The more tenants there are, the more the net payments thin out overall. The price of the rent may be lower as well, due to the extra cost from the three Ns. Meanwhile, the landlord will pay for structural upkeep, such as the roof and the internal plumbing of the building. Keep in mind that this arrangement cannot apply to apartment buildings or other residential properties, but commercial ones such as office spaces, retail, and light industrial buildings.
Benefits of a Triple Net Lease
One of the benefits of a triple net lease is that the burden of maintenance is lighter on the landlord. With the duties and cost lightened in this way, he can put his energy into different ventures or opportunities at the same time.
It is also a benefit to both the landlord and the tenant, as the NNN guarantees a long-term commitment, usually lasting nearly 20 years or so. The longer a tenant stays, the less hassle the tenant has to find a new place and the landlord has to find a new tenant. Also, the longer the agreement, the longer both parties will be able to invest in the property and keep it in excellent condition.
An NNN is also safe for tenants to get into; in other words, it is a low-risk investment, as the tenant absorbs all the costs of the property. It also provides a steady income for investors of commercial properties.
In addition, commercial properties for lease can give tenants a prime location for employees and customers alike. The long-term lease can help businesses establish themselves as a company that plans on sticking around.
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