Commercial tenants sometimes refer to a lease as triple-net. The industry-accepted abbreviation for this term is “NNN.” Triple-net leases are different than a regular, or single-net, commercial lease.
Features
The triple-net lease transfers all of the costs associated with a property to the tenant. These costs include real estate taxes, maintenance, repairs and insurance.
Types
There is a form of triple-net lease even more encompassing than a regular triple-net lease. It is often referred to as an “absolute triple-net lease” and makes the tenant responsible for things such as rebuilding after total destruction of the property.
Considerations
The rent on a triple-net lease is generally lower than other types of commercial leases. If a tenant is able to personally take care of the maintenance and repairs, he might save some money on the total cost of renting the property.
Benefits
A triple-net lease usually gives the tenant control over the selection and hiring of contractors for any maintenance or repairs necessary to the property.
Warning
For an investor, a triple-net lease is a great way to limit financial responsibility. But if the lease results in a net loss to the investor, the loss might not be allowed for tax filing because of passive loss limitations.