Triple net leases (NNN): A guide for commercial property owners

On Behalf of | Jan 23, 2025 | Real Estate Law |

When you use a triple net lease – also known as NNN – your commercial tenants take responsibility for property expenses beyond their regular rent payments. It basically shifts most property ownership costs to your tenant. Under this arrangement, your tenant handles property taxes, building insurance and maintenance and repairs.

This structure differs from traditional leases, in which landlords cover these expenses. It also varies from single net leases (where tenants only pay taxes) and double net leases (where tenants pay taxes and insurance).

What are the benefits?

Triple net leases offer several key advantages for commercial property owners in Florida. First, your rental income becomes more predictable because you’re not dealing with fluctuating expenses. When tenants handle costs like property taxes, insurance and maintenance, you can better forecast your actual income.

You also face less financial risk since tenants cover most property costs. For example, if the air conditioning system needs repairs or property taxes increase, these expenses won’t cut into your profits. This arrangement helps protect you from unexpected costs that could otherwise impact your bottom line.

These leases typically run longer than standard ones, often 10-15 years, providing stable, long-term income. Long lease terms mean fewer vacancy periods and reduced costs associated with finding new tenants. Many triple net leases also include regular rent increases, helping your income keep pace with inflation.

What should you include in your triple net lease?

Creating a solid triple net lease requires careful attention to detail. It should clearly outline all tenant responsibilities to prevent future disputes. Consider addressing:

  • Exact maintenance duties (what repairs tenants must handle)
  • Insurance requirements (especially hurricane coverage in Florida)
  • Payment terms and deadlines
  • Property tax payment procedures
  • Common area maintenance responsibilities
  • Utility obligations

Take note that while triple net leases offer benefits, they also present challenges. Base rent is usually lower because tenants take on more expenses. You will need to make sure your tenants are financially stable and can handle significant responsibilities. There is also the risk of vacant periods between tenants, which means you will have to cover all expenses yourself.

Make your lease work for you

While triple net leases can benefit many commercial property owners, they must be structured correctly. When reviewing or creating this type of lease, consider consulting with an attorney.

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