A triple net, net net net, NNN or net lease is when the tenant pays the expenses such as property taxes, insurance and maintenance costs in addition to the base rent. The triple net expenses are usually quoted as a cost per square foot per year which is added to the base rent cost per square foot per year. Depending on how the lease agreement is written, there may be a provision for an annual review of annual expenses and if the amount collected was less than the actual expenses, the tenant may be billed for this difference or the triple net charge for the next 12 month period may be increased or both of these. There also could be a refund or a reduction in the triple net charges. It is the lease agreement that will define how this is handled. It is common for the tenant to also be responsible for maintenance and repairs to mechanical systems such and heating and air conditioning, entry doors and glass. This arrangement is typical in many retail space properties and some office lease agreements. Triple net lease provisions are also found in most warehouse or industrial leases. So your question might be, why do some landlords pay for these expenses and others don’t? There are a variety of reasons ranging from the vacancy rate in the complex or market place, the age of the complex, the demand for space in the geographical area, and the history or credit worthiness of the tenant. Another commonly asked question is what is the best type of lease to have if you are the tenant or more favorable if you are the landlord? The truth is, it all depends. A tenant could be looking at three or four different options for space that may involve three different types of leases. The only way to know which is more attractive is to do an analysis of all three and then compare the total cost of each. I will continue through out these postings to remind you to not assume when you hear the terms, triple net or full service lease that you understand what that means. Always refer to the lease agreement to understand the total picture of the agreement. If there is language in the agreement that is not clear, ask questions. Have an experienced real estate attorney review and explain the document to you. If you have questions about this information or need assistance in finding space and negotiating a lease, go to my web site at www.tucsoncommercial.com.
Tags: additional rent, base rent, net net net, NNN, questions about leases, triple net expense, Triple Net Lease, Tucson Retail leaseing
