Triple Net

Written by Linda Alexander
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One of the most common types of commercial leases is triple net, or NNN. This means that the tenant is solely responsible for all of the costs related to the property they are leasing. For example, this may include utility bills and maintaining the grass and landscaping. With triple net leases, tenants are also responsible for paying property taxes, sewer and garbage removal, and other maintenance costs.

Two Types of Triple Net Leases

There are two types of triple net leases: absolute and triple net. In an absolute triple net lease, the tenant pays taxes, insurance, and maintenance. This type of lease is generally used in a single-tenant commercial building, such as a retail store or a warehouse, with a long-term lease. It's a good plan for investors who are not present to maintain the building.

In the usual type of triple net lease, the tenant is only responsible for rent and the landlord's estimated operating expenses. It's used for shorter lease terms, and the actual amounts spent and owed are reconciled at the end of the lease term. Exterior walls, foundations, and roofs are usually not the tenant's responsibility, but be sure to be clear about these items before signing any leases.

Many times, investors looking to perform 1031 exchanges search for buildings that already have NNN tenants in place. This makes it easiest for the landlord to exchange property without taking on additional management duties with the replacement property. Companies who specialize in locating 1031 exchange properties will be able to help you locate a building with a triple net lease on it.

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