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Different types of net leases in commercial real estate

On Behalf of | Mar 29, 2022 | Commercial Real Estate

“Net leases” is a term used to identify specific tenants or lessees of California commercial real estate. In the arrangement, renters shell out not only a rental fee but may end up managing maintenance, repairs, taxes, insurance and other expenses.

Here are the most common types of net leases.

Single net lease

Known also as the N or the net, the single net lease is the category’s simplest form. The renter agrees not only to pay rent but property taxes. The drawback is commercial property owners pull away from the single net. The ideal is for renters to take responsibility for more than the rent.

Double net lease

The double net (NN or net-net) is quite common. In this agreement, renters pay for insurance and taxes, as well as rent, for a property. In this case, owners end up shouldering the property’s maintenance. Owners may also take responsibility for structural repairs under these commercial real estate transactions.

Triple N lease

The triple N is without doubt the lease commercial landlords want. Under the lease, the renter pays for a majority of incidental expenses with the monthly rent. The lessee carries the full financial load of the property’s functionality.

Bondable net lease

Also known as a “hell or high water” or “absolute triple net” lease, the bondable net goes to the extreme and is something of a property owner’s dream. Renters are pretty much held accountable for everything, including repairs caused by natural disasters, vandalism and terrorism. These contracts must be carefully reviewed as they can include a clause that prohibits renters from pre-terminating the lease.

If anyone at the table is talking about net leases, you need to learn everything about the instrument and particularly the type. Provisions should be acceptable and, most importantly, align with your budgetary plans.