In a triple net lease, the tenant pays for building maintenance, property insurance, and property tax in addition to monthly rent.
What is a triple net lease?
A triple net lease is a commercial lease agreement in which the tenant is responsible for three expenses in addition to rent:
- Building maintenance
- Property insurance
- Property tax
To accommodate the additional expense, a triple net lease typically has a lower base rent than a standard lease (also known as a gross lease). Triple net leases are not common in residential real estate. However, they are common in commercial real estate, particularly in multi-unit structures such as strip malls. A triple net lease is also known as an NNN (net, net, net) lease.
Double net and single net leases
In addition to a triple net lease, a commercial renter may encounter a double net lease, in which the tenant is responsible for property tax and property insurance as part of the rental agreement. There is also a single net lease, in which the tenant pays for property tax in addition to the monthly rent payment.
Triple net lease examples
A triple net lease is similar to a standard lease in which the tenant has low monthly rent payments but has to cover expenses, such as gas or electricity as well. As with a standard lease that does not include electricity, a renter considering a triple net lease needs to look at the total cost, not just the monthly rent payments. Although a triple net lease could look like a good deal, the renter might want to reconsider after factoring in the costs of property tax, property insurance, and maintenance costs.
When considering a commercial property with a triple net lease, the cost of potential repairs is a major determinant. For a newer building, repair and maintenance costs tend to be low, but a tenant moving into an older commercial space should be aware that large expenses could loom on the horizon.
Triple net leases often come with specific insurance requirements. The tenant typically must carry general liability insurance and property insurance at a minimum. A small business with a low risk profile may be eligible for a business owner’s policy, which bundles these two types of insurance together at a discounted rate.
Insureon’s commercial insurance agents are familiar with triple net leases and how they could benefit your business. Apply online for free business insurance quotes from Insureon’s network of top-rated U.S. carriers. Our insurance specialists are licensed in every state and can help your business find affordable protection for the risks it faces.
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