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Understanding Triple Net (NNN) Leases in Commercial Real Estate

Last Updated May 9, 2023

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The Cogs of Industrial LeasingA Triple Net (NNN) lease is a popular type of commercial real estate lease agreement where the tenant is responsible for paying the base rental amount each month to the landlord. In addition to the base rent, the tenant also reimburses the landlord monthly for their pro-rata share of certain estimated expenses, known as “reimbursables.” These expenses may include property taxes, property insurance, and Common Area Maintenance (CAM). Reimbursables are expenses that the landlord pays for out of pocket but expects to be reimbursed by the tenant contractually.

General NNN leases differ from true or absolute NNN leases in terms of landlord responsibilities. For example, a true NNN lease typically has no landlord responsibility, while a general NNN lease may require the landlord to maintain the roof, walls, and foundation, or some combination thereof. These leases can be used for all types of commercial properties but are more often applied to single-user leased properties.

Leasing Overview Information

For an overview of the major lease types used in commercial leasing, refer to our article on Types of Commercial Real Estate Leases. For a more comprehensive guide to commercial leasing, check out our article on Entering Into a Commercial Lease Agreement - A Guide From a Broker.

A commercial lease is a detailed specification of the property you will gain access to as a tenant, along with the responsibilities of both the tenant and landlord in terms of the property’s elements and the expenses involved. There are many different types of leases, and each should be analyzed carefully to ensure they meet your expectations. Divvying up who will pay for what costs – both now and throughout the lease’s life – is a major aspect of any lease. The following list summarizes some of these cost categories:

  • Base Rent
  • Insurance
  • Taxes
  • Property Improvements
  • Property Repairs
  • Common Area Maintenance (CAM)
  • Landscaping
  • Mowing
  • Maintenance
  • Janitorial
  • Security
  • Supplies
  • Food Service
  • Vending
  • Utilities
  • Water
  • Electricity
  • Sewer
  • HVAC
  • Sanitation
  • Telecommunications
  • Networking

A significant part of a lease is outlining how these and other expenses are divided between the landlord and tenant and how these expenses can vary over time for the tenant. This can, and probably should be limited by caps applied in the lease.

If you’re looking for warehouse, office, or other space or need to renew your lease, consider reaching out to a licensed real estate agent or broker who specializes in commercial real estate. Our experienced professionals at Warehouse Finder can help you navigate the complexities of commercial leases and find the perfect property to suit your needs.

In conclusion, understanding Triple Net (NNN) leases is crucial when entering into a commercial real estate agreement. By carefully analyzing the terms and conditions, you can ensure a lease arrangement that meets your expectations and keeps your costs predictable. Whether you’re a tenant or a landlord, being well-informed about the different types of commercial leases, including NNN leases, will help you make better decisions and achieve success in your commercial real estate endeavors.

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