Leasing triple net properties is a common structure in commercial real estate. In spite of its popularity, brokers often fail to grasp the whole concept of leasing triple net properties. In this article we have thoroughly discussed the common understandings involving triple net properties.
What is a Triple Net (NNN) Lease?
In a NNN lease structure, the tenant is bound to pay all operating costs. It is also referred to as a “turnkey” investment: the owner doesn’t have to bear any operating costs. To have a total understanding of NNN lease, it is important to know the spectrum of commercial real estate lease first.
The Spectrum of Commercial Real Estate Leases
Every real estate lease lies either on the absolute net lease side or absolute gross lease side of the spectrum. And an NNN lease falls in the absolute net lease category. However, for convenience, we usually refer to it as a triple net lease.
Always review the lease when dealing with triple net properties leasing. This is part of your due diligence process of evaluating leases. This is the only way out to get familiar with all terms and conditions. Labels like modified gross, triple net, and full service may often be in conflict with the penned terms.
What the NNN Lease Does Not Include
One common misconception about absolute net lease is that it covers all expenditures that involved with a property. But it is not always the case; there are few costs relevant to absolute net lease, which the tenant has no obligation to bear.
For instance, an NNN leasing doesn’t cover the accounting costs of reviewing or drafting documents. Though this seems to be nothing in comparison to the cost of purchasing a property, leasing triple net properties doesn’t cover them at all. Thus it would be wrong to think of every cost as absolute, though the name suggests so.