Triple Net (NNN) Lease Agreement | For Commercial Property

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A triple-net (NNN) commercial lease agreement is a contract between a landlord and a tenant that pays for the three (3) nets, property insurance, real estate taxes, and common area maintenance (CAM’s). These costs are usually estimated for the year and incorporated into the rent on a monthly basis. At the end of the year, if the costs were lower then the tenant gets a refund, and if more then the tenant will owe the difference. Tenants will usually request the triple-net (NNN) amount to be capped based on the expenses for the previous year.

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What is a Triple-Net (NNN) Lease?

A triple-net (NNN) lease is a contract for commercial property where the tenant is responsible for all expenses related to the property, specifically, property insurance, real estate taxes, and common area maintenance (CAM’s). In most triple-net (NNN) leases, this also includes all utilities and services used by the tenant. This mainly applies to retail, industrial property, and free-standing buildings.

What does NNN Mean?

Net, Net, Net

Refers to a commercial lease where the tenant pays for:

  • Net – Property Insurance
  • Net – Real Estate Taxes
  • Net – Common Area Maintenance (CAM’s)

Pro-Rata Share

A tenant is liable for their pro-rata share of real estate expenses for the entire property. For example, if the tenant is located in a strip mall renting 10,000 square feet, while their space is only 1,000 square feet, the tenant would be responsible for 10% of the NNN expenses.

Landlord’s Responsibility

The landlord is only responsible for the following:

  • Maintaining the parking lot and common areas;
  • Roof and structure of the building;
  • Maintaining irrigation systems; and
  • Updating Signage.

Pros and Cons

A triple-net (NNN) lease is known for being a long-term fixed arrangement although with only minimal rent increases.

Pros

  • Long-term lease;
  • Expenses are controlled; and
  • It provides a fixed income.

Cons

  • The landlord must track and pay the expenses;
  • Rent increases are minimal (in most cases);
  • If build-to-suit, there is high exposure if the tenant defaults.

Sample Triple Net (NNN) Lease

Download: Adobe PDF, MS Word (.docx), OpenDocument

How to Write

Download: Adobe PDF, MS Word (.docx), OpenDocument

Step 1 – 

Related Agreements

Co-Working Lease – For independent contractors that primarily work online to rent shared office space with limited amenities.

Gross Lease – Commercial lease where the tenant only pays a fixed monthly rent amount along with their utilities. The landlord pays for all property maintenance, taxes, and insurance.

Modified Gross Lease – Commercial lease where the tenant pays a portion of the expenses related to the property.

Office Lease – Commercial lease designated for professional use and services.


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