A triple net lease (Net-Net-Net or NNN) is a lease agreement on a property where the Tenant agrees to pay all real estate taxes, building insurance, and maintenance on the property in addition to any traditional charges under the lease agreement (e.g. rent, utilities, etc.).
Two Net-Net-Net lease facts:
Typically, the Tenants share of the NNN fee is based on their pro rata share of total leasable space in the property. For example, if you lease a 1,000 sq. feet out of a 10,000 Sq. feet building your pro rata share is 10% (1,000/10,000 Sq. feet) Meaning you would be responsible for 10% of the buildings NNN expenses.
The Tenants estimated NNN fee for the current year is based off the previous year’s actual NNN expense. Every year the Landlord should provide the tenant with a NNN breakout of the actual property expenses. Typically, the tenant will either owe the landlord additional money (due to the estimated paid NNN fee being less than actual NNN amount) or the Landlord will owe the tenant a credit (due to the estimated paid NNN fee being higher than the actually NNN amount.)
When negotiating a NNN Lease you should:
Cap your NNN annual escalation (Make sure your NNN fee cannot exceed X% per year).
Exclude all repairs and maintenance expenses associated with common area ADA compliance, hazardous materials clean up etc.…
Each property and each tenant within that property typically have different lease terms and clauses. You should always have an experienced broker (preferable Brodovsky Commercial ) representing you in negotiating your lease.
Although our moms’ always told us nothing is for free, my services are 100% free of charge to the Tenant.
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