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How does a triple net lease work?

On Behalf of | Jun 16, 2022 | Landlord-tenant law

As a commercial property owner, you want to create the best terms when you lease those properties out to business owners. One thing to consider is what type of lease you want. You can use a standard lease, a single net lease, a double net lease or even a triple net lease.

Not all of these are right for all situations. It’s important to carefully consider what they provide.

An escalation of responsibilities

Essentially, each net just adds another financial responsibility to the tenant. With a standard lease, for instance, the tenant only has to pay for the rent every month. They may also have to cover the utilities that they use.

With a single net lease, however, the tenant is required to put money aside to pay the property taxes. This can help you as a landlord by reducing the annual cost of owning that property. A double net lease means that the tenant also has to pay for property insurance. This both protects your property and removes yet another cost, as you likely would have had an insurance policy on your own if the tenant wasn’t required to do so.

A triple net lease is the farthest level generally used, and it adds in a lot of different expenses. The tenant may have to pay for things like:

  • Maintenance
  • Insurance
  • Real estate taxes
  • Upkeep
  • Rent and utilities
  • Any additional property expenses

In many ways, a triple net lease gives the tenant all of the responsibilities that they would have if they were the property owner. However, you still retain ownership yourself, meaning that you have very few financial costs that you need to cover. You also know that there won’t be something unexpected, such as damage to the property, considering the fact that the tenant would have to pay to fix it.

It’s important to determine exactly what type of lease would be right in each situation, and you also want to look into all of your legal options as you set everything up. You may also need to look into your legal options if you’re involved in a dispute with a tenant who believes that you are responsible for costs that they agreed to cover in the lease.