How Do Triple Net (NNN) Leases Work?
Learn how NNN lease structures shift operating expenses from landlord to tenant.
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A triple net lease—often called an NNN lease—is a commercial lease structure where the tenant pays three separate categories of expenses in addition to rent: property taxes, insurance, and maintenance.
The Three Nets
Net #1: Property taxes. The tenant reimburses the landlord for all property tax assessments on the leased space or building.
Net #2: Insurance. The tenant covers the cost of property and liability insurance required to maintain the property.
Net #3: Common area maintenance (CAM). The tenant pays for repairs, utilities, landscaping, and other upkeep of common areas like parking lots and hallways.
Why NNN Leases Matter
NNN structures benefit landlords by making the tenant responsible for most ongoing costs, resulting in more predictable net income. Tenants prefer them when they can control operating expenses and pass savings back to operations.
Key Consideration
NNN leases typically show lower base rents than gross leases because tenants absorb operating costs. Always compare the total cost of occupancy—base rent plus estimated NNN charges—when evaluating properties.