In a triple net lease, the tenant is responsible for real estate taxes, maintenance, and insurance. But what is the landlord responsible for? In today’s post, we provide an answer and offer an overview of net leases.
What Is a Landlord Responsible for in a Triple Net Lease?
In a triple net lease (commonly known as NNN lease), the landlord is responsible for the mortgage and for any structural repairs or major utility upkeep. The tenant, for their part, is responsible for paying real estate taxes, maintenance and insurance.
Triple net leases are popular because they free landlords of several obligations. At the same time, they allow tenants to pay lower base rent while enjoying some degree of control over occupancy expenses and the appearance of the building.
However, as is the case with any type of lease, it is crucial to clarify the terms of the agreement to their fullest extent before signing a contract.
For example, according to the definition offered above, the landlord is responsible for covering structural repairs and major utility upkeep. But what constitutes “structural damage,” exactly? And what will fall into the “major utility upkeep” category?
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It is in the interest of the landlord and the tenant that all these terms are clearly defined before signing the lease. This will head off future disputes and instill greater confidence in all parties involved.
If you need assistance navigating a commercial lease, contact the specialists at SoCal CRE Teams today. With extensive experience and an unwavering drive to excel, we stand ready to help you with even the most daunting commercial real estate challenges.
Other Types of Net Leases
Although they are very common, triple net leases are just one type of net lease. Here are other alternatives:
- Single net lease (N lease). In addition to rent, the tenant is responsible for paying the building’s real estate taxes.
- Double net lease (NN lease). Here the tenant is responsible for paying rent plus two of the expenses associated with the building: real estate taxes and insurance.
- Triple net lease (NNN lease). In an NNN lease, the tenant pays rent plus real estate taxes, insurance, and maintenance.
- Absolute net lease. The tenant pays all the expenses of an NNN lease plus the expenses to maintain the condition of the property, including major repairs.
To learn more about commercial real estate, read our previous blogs, “What Is Flex Industrial Space?” and “CPI vs PPI: Which Metric Is More Important in Commercial Real Estate?”
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Disclaimer: This material is for general information and educational purposes only. It is not guaranteed as to accuracy, does not purport to be complete and is not intended to be used as a primary basis for investment decisions.