NNN = An acronym that stands for Triple Net Lease.
This form of lease agreement is almost always related to a commercial property. Consisting of a landlord and tenant relationship. A NNN lease agreement consists of the base rent price (ex. $12/sqft.) in addition to the triple net terms (ex. $12/sqft. + NNN).
The NNN entails in costs due in addition to the base rent, therefor the tenant is also responsible for the following costs…
N-#1: Property Taxes – The tenant is responsible for the real estate taxes throughout the term of their lease. This is traditionally only the portion of the real estate the tenant uses. So, for example in a multiple tenant property, lets say there are three tenants total. Therefor the total property tax bill costs may be split equally between all three commercial tenants. Often times the landlord pays the tax bill, however charges the tenants the cost of the tax bill, respectively.
N-#2: Building Insurance – Let’s assume similar circumstances as above. Of the total property insurance policy; each tenant is responsible for the costs of their portion of the building.
N-#3: Property Maintenance & Repairs – Simply each tenant is responsible for the costs of their portion of common area maintenance and building repairs. Often times this ensures that the building remains in good condition throughout the term of the lease.
There are numerous perspectives regarding a triple net lease, both from the landlord and from the tenant. Some landlords prefer entering NNN agreements because once occupancy rates are ideal, they no longer have to be as concerned with property management and maintenance. Some tenants prefer NNN agreements because often times it secures a location for a fair term and they know their building will be maintained to their level of standards.
Here’s a common example…
Base rent = $12/sqft
NNN = $3/sqft
Total = $15/sqft
If ‘Bob’s Shoes’ is going to rent a 900 sqft. retail location in a strip plaza for $12/sqft + NNN
$900 =base rent @ $12/sqft
$225 = NNN @ $3/sqft
‘Bob’s Shoes’ will pay a total of $900/mo. + $225/mo = $1,125/mo.
All in all, whether you’re a landlord or tenant, prior to entering any commercial lease agreement it is important to consult with a commercial real estate broker and/or an attorney that specializes in commercial real estate law.
If you have any questions or concerns regarding any information covered above, or any other commercial real estate inquires. Please contact Zane Peterson.