When you’re looking at a business lease, everything is negotiable – including the rent. As a renter, you can often benefit from considering net, double net and triple net leases.
These leases vary in terms of the way financial responsibilities are distributed between the landlord and the tenant, and they’re also a way of allocating risk. Here are the key differences:
Single net (N) leases
A net lease or a basic lease, is a type of lease agreement in which the tenant pays a base rent plus one additional expense (typically, property taxes). The landlord retains all the responsibility for the property’s insurance and their maintenance costs. This alleviates a lot of financial insecurity for tenants and helps landlords retain more control over the property’s condition.
Double net (NN) leases
A double net lease is often referred to as a net-net (NN) lease puts a little more burden on the tenant. These types of leases generally obligate the tenant to pay not only a base rent but the property taxes and property insurance – while leaving the landlord to handle the maintenance and any costs related to common areas.
Triple net (NNN) leases
A triple net lease shifts most of the financial liability and operating expenses to the tenant, not the landlord. Tenants with NNN leases pay a base rent, property taxes and insurance and they cover all the maintenance costs. This can offer a measure of security, however, to long-term tenants who want to have full control over the physical building.
All of these are distinct from “gross” leases, which simply charge a flat rate for the monthly rents. Given the options, why would tenants agree to N, NN and NNN leases? Aside from the control aspect offered by NNN leases, tenants who enter into any kind of net lease usually do so because they’re getting a reduced base rent.
Negotiating your first commercial lease can be hard, and mistakes can be incredibly costly. To protect your interests, it’s usually wise to get some legal guidance early in the process
