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What is a triple-net lease?

Not all commercial leases and real estate contracts address the same needs and concerns. There can be substantial differences, and it’s very important to understand what these are before signing.

For example, a standard lease just requires the person who is using a property to pay the rent every month. This is how many residential leases work, but a rental arrangement can be very different for a commercial lease. A certain “net” may be used, defining what the tenant is responsible for beyond basic rent.

Escalating payments

Each net essentially just adds more responsibilities to the bill. For example, in addition to paying the rent, a single net lease means that the tenant has to pay property taxes. If a double net lease is used, this means that they have to pay for rent and property insurance, along with property taxes.

At the top end is a triple net lease. The tenant takes on many other expenses, such as paying for the building insurance and the costs of maintenance and upkeep. They may also pay for the utilities, along with the aforementioned property taxes and property insurance.

Triple net leases are popular with building owners because the owners can remain rather uninvolved. Once a tenant signs the lease, they cover almost all of the costs and can use the property in any way that they see fit. The owner sees this as a long-term investment that generates consistent income through those rent payments, without being obligated to continue paying property taxes or maintenance costs.

As noted above, it’s very important for both sides to fully understand the ramifications of a lease or a real estate contract before signing. Seeking legal guidance before committing to an arrangement can help to better ensure that everyone’s needs and rights are considered and reasonably safeguarded.