Definition: A Triple Net Lease, also called an NNN lease or net net, is a real estate lease that transfers the obligation to pay for all operating expenses to the tenant. In other words, the tenant will be solely responsible for paying the real estate taxes, insurance, and utilities of the property.
What Does Triple Net Lease Mean?
What is the definition of triple net lease? Net net leases are commonly found in the commercial real estate business where many landlords want fixed incomes. These leases transfer all taxes, utilities, maintenance, insurance, and rent obligations to the tenant.
NNN Leases typically have clauses that exclude major maintenance from those obligations because these expenses are considered capital expenditures and as such are usually the responsibility of the property owner. These leases are commonly used in many different types of commercial properties such as shopping malls, parking lots, and office buildings.
Let’s look at an example.
Mr. Logan is the owner of a small shopping mall located in the city of New Jersey. He’s 72 years old and lives with his wife a few hours from the mall. He’s tired of having to deal with tenants and maintenance, so he decides to lease the property to a management company that could manage it and take care of all of the operating expenses. This way Logan will receive a fixed payment each month for the lease without worrying about problems.
A net-net-net lease issued by Mr. Logan (lessor) to a managing company (lessee) will allow him to pass on the operating responsibilities of the building to the management company. Thus, the management company will have to pay rent, taxes, maintenance, and insurance on the building. Logan will most likely have to agree on a smaller lease payment than he previously was used to receiving, but he will shift the upkeep costs and responsibilities to the third party.
Define Triple Net Lease: NNN lease means a rental contract that stipulates the renter must pay all operating expenses of the property.