Are you confused between the different types of commercial net leases? Let’s take a look at them individually:
Single Net Leases
Also known as “N” Lease, single net leases are the uncommon situation in which the landlord passes on the least amount of risk to their tenant, who only pays property tax. Other expenses, including utilities, insurance, and repair and maintenance are paid for by the landlord. During the course of the leasing period, the repair and maintenance needs of the property must also be met by the landlord.
Given the property tax obligation for the tenant, the rent for single net lease is comparatively lower than that for standard leases. Yet, the ultimate responsibility for tax payments lies on the landlord. If a tenant misses a payment, the authorities will hold the landlord responsible for the default.
Double Net Leases
Most common in commercial real estate, double net leases or “NN” leases are a situation in which the tenant pays not only the rent but also insurance premiums and property taxes. Because of these added expenses that need to be paid by the tenant, the base rent for the property tends of be lower. On the other hand, all maintenance and repairs are paid for directly by the landlord.
In the case of larger commercial developments, in which multiple rental units are involved, such as in large office complexes and shopping centers, different tenants use varying amount of spaces. Therefore, landlords usually assign insurance costs and taxes to tenants in proportion to the leased space.
Triple Net Leases
Triple Net lease, or “NNN”, comes with minimal responsibilities on the landlord’s part because everything from rent, insurance premiums, and property taxes to structural repairs and maintenance are paid for by the tenant. Keeping this in mind, it’s no wonder that the landlord charges a lower base rent.
With high maintenance costs under triple net leases, tenants either demand rent concessions or try to get out of their leases. To prevent this, landlords often consider using a bondable triple net lease instead. Under this type of lease, neither party can terminate the triple net lease before the date of expiry, nor can the rent be altered, even in the case of significant, unexpected increase in ancillary costs.
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This was our take on the three different types of net leases. To find high-quality retail space available on lease, reach out to Milbrook Properties, which will serve as your real estate broker in the process.