Leasing

Triple Net Lease (NNN)

A triple net (NNN) lease is a commercial lease where the tenant pays base rent plus their pro-rata share of property taxes, insurance, and common area maintenance.

A triple net lease, abbreviated NNN, is a commercial lease structure in which the tenant is responsible for base rent plus three additional categories of operating cost — the "three nets": property taxes, building insurance, and common area maintenance (CAM). Because the tenant absorbs most variable operating expenses, NNN leases give landlords predictable net income and are common in retail, industrial, and single-tenant net-lease investments.

The three "nets"

Under an NNN lease the tenant reimburses the landlord for:

  • Property taxes assessed on the building and land
  • Building and liability insurance premiums
  • Common area maintenance (CAM) — operating and maintaining shared areas

NNN vs gross and modified gross leases

In a full-service (gross) lease the landlord pays operating expenses out of the rent. A modified gross lease splits them. In a triple net lease the tenant pays base rent plus their share of all three nets — usually estimated monthly and reconciled annually against actual costs.

Example

A tenant signs an NNN lease at $25 per square foot base rent. On top of that they pay their pro-rata share of the property’s taxes, insurance, and CAM — say another $8 per square foot — for an effective occupancy cost of about $33 per square foot.

See how Plazee handles NNN reconciliation

Frequently asked questions

What does NNN mean in a commercial lease?

NNN stands for "triple net," a lease in which the tenant pays base rent plus their share of three operating costs: property taxes, insurance, and common area maintenance.

Are NNN charges estimated or actual?

Landlords usually bill estimated NNN charges monthly and then reconcile against actual costs after year end in an annual true-up, charging or crediting the difference.

Why do landlords prefer NNN leases?

Because tenants absorb the variable operating expenses, NNN leases give landlords more predictable net income and reduce their exposure to rising taxes, insurance, and maintenance costs.

Related terms

CAM

Common Area Maintenance (CAM) is the cost of operating and maintaining the shared areas of a commercial property, recovered from tenants based on their pro-rata share.

True-Up

A CAM true-up is the annual reconciliation that compares the estimated CAM a tenant was billed to their share of actual costs, then charges or credits the difference.

Base Year

A base year is the reference year whose operating expenses set a baseline — the tenant later pays its pro-rata share of any expense increases above that base.

Pro-Rata Share

A pro-rata share is a tenant’s proportion of a property — typically its rentable square footage divided by the property’s total rentable square footage — used to allocate shared expenses.

All terms

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