What is a Triple Net Lease
Net-Net-Net or in short NNN is the common name for the term Triple Net Lease (TNT). TNT is a kind of lease agreement. A property on which such a lease agreement exists or is in operation, there the lessee or tenant is required to take responsibility of some extra or added fees. The tenant will be required to clear all the applicable taxes for real estate on that particular property. Moreover, he or she will be required to pay the building maintenance costs along with the costs of insurance. Here, the tenant must understand the fact that, he will be paying these amounts as an extra amount to the normal taxes on the property. The NNN or 3 Nets indicate the costs of building insurance, building maintenance and the taxes of real estate.
This kind of lease agreement is not so common for residential buildings. For the fact, Triple Net Lease is used in case of most of the commercial buildings. However, in the last few years, some small home buyers are also facing this kind of lease agreements. Sellers or owners of property like this kind of arrangement because it relieves them of the headache of extra costs in the future. On the other hand, the tenant needs to be very careful with such an arrangement as quite a higher level of caution and monitoring is required to fulfill the taxation requirements in such an agreement.
If you are going for such an agreement, then you should remember that, such an arrangement will require lesser rent than usual. Many tenants get cheated in these agreements by paying the normal rent as they are not much aware about the market scenario. For example, the normal rent of a building is $5000 dollars. If one goes for the Triple Net Lease, then the rent payable should be lower than this in a proportionate manner as after the agreement, the new owner will be responsible for all kinds of taxes including the insurance costs and maintenance costs.
If you are a property owner, then at the first sight, you might like the idea of Triple Net Lease very much. But, be very cautious before going for this kind of lease agreement. Practical experiences in the last few years have proved that, it’s not safer to leave all the insurance issues or costs to the tenant. The tenant might intentionally damage the property beyond insurance claims. Moreover, they can over-insure the property for negative results for the owner. On the other hand, this kind of lease agreement is not foolproof for the tenants either. They may get trapped in unsolved taxation issues after taking over a certain property. So, it’s not a win-win situation at all.