This is the most popular type of net lease for commercial real estate, plaza, and retail space. It is known as the Net Net Net lease, or NNN lease, where the tenant pays all or part of the three “nets”–property taxes, insurance, and common area maintenance (CAM)–on top of base monthly rent (Net Rent).
Commercial Landlords typically estimate expenses and charge tenants a portion of these expenses based on their proportionate, or pro-rata share. A tenant who leases 1,000 square feet of a 10,000 square foot building would be expected to pay 10% of the building’s taxes, insurance, and CAMS, for example.
Triple net commercial leases tend to be more landlord-friendly, and tenants should carefully review NNN fees and negotiate caps on the amounts they can be raised annually. An NNN lease can also fluctuate from year to year as operating expenses increase or decrease, making the company’s expense forecasting tricky and sometimes frustrating.
There are tenant benefits in the commercial NNN leases, however. Transparency is an excellent perk since tenants can see business operating expenses in relation to what they are charged. Cost savings in operating expenses are passed on to the tenant rather than to the landlord. In addition, the monthly rent in a NNN lease is potentially lower than in a gross lease (another type of lease), as tenants have a higher level of responsibility for the building.
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By: Mike Cobb/Colliers International – Modified by Denno