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Thursday, January 24, 2013
Understanding Triple Net (NNN) Leases
The decision by an investor to purchase a commercial real estate
property requires a clear understanding of revenues and expenses. Leases must properly detail which expenses are paid by the
tenants and which expenses are the responsibility of the landlord. Lease types include gross, modified, modified gross, percentage,
net, modified net, double net, and triple net (NNN).
What is a Triple Net
(NNN) Lease?A triple net lease provides that a tenant agrees to pay a monthly
lump sum base rent, and also his proportionate (pro-rata) share of real property taxes, property and liability insurance,
and maintenance (repairs, common operating expenses and common area utilities). Each tenant is further responsible for all
costs associated with their own occupancy, including personal property taxes, personal property and liability insurance, utility
costs and janitorial services. The responsibility for maintenance and capital expenses must
be well-defined and fully understood by both the tenants and the landlord. Typically, capital expenses are borne by the property
owner, including the exterior and structural elements of the building. It is customary that the plumbing, electrical, and
HVAC maintenance is the responsibility of the tenants. Each tenant’s prorated share
of property taxes, insurance and operating expenses are generally estimated on an annual basis, and paid monthly. It is customary
in a commercial real estate sales transaction that the purchase contract sets forth the details by which the investor and
his agent verifies the provisions of each NNN Lease by his own due diligence work while in escrow.
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| "Carpe diem" (Horace, Rome 65 BC - 8 BC) |
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| "Life is an adventure" |
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| Climbing to 11,500' elevation "Meysan Lake" |
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| "Camp Lake" at 11,200 feet elevation |
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| Setting up camp at "Camp Lake" |
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