A triple-net lease, often called a “NNN lease,” is commonly used in commercial real estate. Despite their popularity, many commercial real estate professionals misunderstand triple-net leases.
In this guide, learn about triple-net leases, what they do and don’t include, and some of the common risks involved. Armed with this knowledge, you can better understand how to make triple-net leases work for you or find better options.
One such option is Prologis Clear Lease®, which includes base rent plus a fixed charge inclusive of most operating expenses, management fees, capital repair and replacement expenses.
What is a Triple-Net Commercial Lease?
Commercial real estate leases operate along a spectrum where absolute net leases are at one end and absolute gross leases are at the other. An absolute net lease requires the tenant to pay all expenses. In an absolute gross lease, the tenant pays a set amount in rent, while the landlord pays all other real estate expenses. The typical commercial lease is often called a “hybrid lease” because it falls somewhere between the two ends of the spectrum.
Triple-net leases usually fall under the absolute net lease umbrella, but it is important to recognize that a NNN lease is not necessarily an absolute net lease.
Whether a NNN lease is an absolute net lease often depends on the age of the building.
For instance, if a building is brand new, the tenant of a NNN lease is usually responsible for paying for expenses related to renovations and repairs, such as replacing the HVAC if it wears out over time.
But if the building is older, the landlord might be responsible for repairs, even though the lease is a triple-net commercial lease.
The only way for a tenant to ensure operations under a true NNN lease is to read the agreement in its entirety. It is not uncommon for landlords to use terms like “triple net,” “full service” or “modified gross” in the lease language, but those words might not reflect the terms of the lease accurately.