Triple Net Lease (NNN)


A Triple net lease (also referred to as NNN or Net-Net-Net or "hell or high water" lease) is a lease agreement on a property where the tenant or lessee agrees to pay all Real Estate Taxes (Net), Building Insurance (Net) and Common Area Maintenance (Net) on the property in addition to any normal fees that are expected under the agreement (rent, etc.). In such a lease, the tenant or lessee is responsible for all costs associated with repairs or replacement of the structural building elements of the property.

Although rents are usually lower in Triple net leases than other forms of lease agreements, this form of lease agreement is considered to be optimal for real estate investors since the expenses incurred on the investor are dramatically decreased due to the transfer of financial responsibilities on the property from the investor/owner to the rentor/lessee. This form is frequently used for freestanding buildings, such as outparcel developments or single-tenant "big box" sites.

Use of a triple net lease may be a prerequisite for credit tenant lease financing, and may permit a lender to lend to the landlord on non-recourse terms.

In a "Double Net Lease" (Net-Net) the Lessee or Tenant is responsible for Real Estate Taxes (Net) and Building Insurance (Net), the Lessor or Landlord is responsible for Common Area Maintenance (Net). "Roof and structure" is sometimes calculated as a reserve, the most common amount is equal to $ .15 per square foot. Double net leases are rarely used in the industry.

A bondable lease is a variation of a triple net lease where the tenant also carries the casualty insurance on the property. These leases are not terminable by the tenant.

A great example of these type of lease is a retailer leases back the building and still runs the store.