Understanding a Triple Net Lease (NNN): What Every Property Owner and Tenant Should Know
Whether you’re a property owner, investor, or business tenant (Lessee), understanding how a triple net lease works can help you make smarter financial and operational decisions.
What Is a Triple Net Lease?
A triple net lease (NNN) is a type of commercial lease agreement where the tenant/Lessee pays rent and also the three “nets”:
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Property taxes
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Insurance premiums
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Maintenance and operating expenses
The Lessee is responsible for most costs associated with operating the property, while the Lessor typically handles only structural repairs and financing obligations.
This structure is common in retail spaces — particularly with single-tenant properties like banks, pharmacies, and fast-food restaurants.
How It Works in Practice
Imagine a tenant leasing a free-standing building for a restaurant. Under a triple net lease:
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The tenant pays monthly base rent to the landlord.
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The tenant also pays property taxes directly (or reimburses the landlord for them).
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The tenant secures and pays for property insurance.
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The tenant covers maintenance costs — everything from landscaping and parking lot cleanup to HVAC repairs.
Essentially, the landlord receives a predictable stream of income with minimal day-to-day management, while the tenant gains control over how the property is maintained and operated.
Advantages of a Triple Net Lease
For Property Owners:
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Stable, passive income: Since tenants handle most expenses, landlords enjoy steady cash flow.
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Lower risk: Rising property taxes or insurance rates don’t cut into profit margins.
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Attractive to investors: Many investors favor NNN properties as long-term, low-touch investments.
For Tenants:
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Greater control: Tenants maintain the property according to their business needs and brand standards.
Potential Drawbacks
While appealing, NNN leases aren’t for everyone. Lessees must be prepared for variable costs — if property taxes or maintenance needs rise, so do their expenses. Lessors, on the other hand, must ensure tenants are financially stable enough to handle these responsibilities.
Final Thoughts
A triple net lease can be a win-win arrangement when structured properly. Landlords gain a reliable, low-maintenance income stream, while tenants enjoy control and flexibility in managing their business premises.
Whether you’re buying, leasing, or investing, understanding the details of a triple net lease is essential for making informed decisions in commercial real estate.
