What is a Net, Net lease, vs a Net, Net, Net Lease?
Net-Leases: Simply leases which net out expenses. The more “net” a lease is the less property management related responsibility a landlord or owner has.
Net, Net Leases (Double-Net or NN): Usually means that the tenant not the landlord is responsible for all operating expenses and real estate taxes. Usually however, the owner or landlord is responsible for the building roof and structural integrity.
Net, Net, Net Lease (Triple Net or NNN): Usually means that the tenant not the landlord or owner is responsible for all operating expenses, real estate taxes and the building roof and structural integrity.
There are various forms of Net leases and all have varying degrees of net aspects. The most desirable is commonly called a triple-net “bond” net lease. This lease adds the protection for casualty and condemnation. This is considered the best lease for the owner or landlord.
Assuming the tenant is of investment grade quality, the expectation is that the tenant will pay rent no matter what – even if the property is destroyed by casualty or “taken in condemnation”. There is no concern for rental stream interruption.
On the other end of the spectrum, is the net lease (“single” “net” or “N”) which has the tenant paying rent and possibly real estate taxes and or operating expenses, but usually involve the landlord or owner making these payments with some amount of reimbursement. This is the most undesirable form of a Net-lease, due to the landlord or owners involvement in the management of the property.
The terms Net, Net, Net are often used loosely in our business to define leases which are offered for sale.
We have attempted to place the available properties in their proper categories, but we strongly advise you and your counsel to completely review any lease you are interested in, since slight variations in lease language can have significant impact on how “Net” is the lease.
NN Lease (Double Net; Net, Net, Lease): Landlord is responsible for roof and structural integrity. Tenant is responsible for operating expenses and real estate taxes.
NNN Lease (Triple Net Lease): Tenant is responsible for all operating expenses, real estate taxes, the roof, and the structural integrity of the building.
NNN “Bond” Lease (Triple Net “Bond”): Tenant is responsible for the operating expenses, real estate taxes, roof, structural integrity of the building and for faithful and uninterrupted rental payments, even in the (unlikely) event of a casualty or condemnation.