The First Thing We Published

You found a space. The broker quoted you a base rent. It sounds workable. Then the lease arrives, and it describes a triple net structure. Suddenly the advertised figure is no longer the number that matters.

Why the advertised rent figure is only the starting point

In commercial real estate, there are several different lease structures that determine how costs are divided between landlord and tenant. A gross lease bundles most operating costs into the base rent. The tenant pays one figure and the landlord handles the rest. A modified gross lease splits things somewhere in between. A triple net lease moves a specific set of three cost categories directly onto the tenant.

Those three categories are property taxes, building insurance, and building maintenance. When you lease under a NNN structure, your monthly payment to the landlord is base rent plus your proportional share of each of these. The "net" in triple net refers to the landlord receiving rent net of these expenses, because you are covering them.

The three nets and how each one behaves

Property taxes are assessed by local governments and can change based on property reassessments, tax rate changes, and appeals. When you sign a NNN lease, you are agreeing to pay whatever portion of property taxes falls to your pro-rata share for the entire term of the lease, even if that amount increases year over year.

Building insurance covers the physical structure. This is not the same as your own business insurance, which you will also carry. The building insurance is the landlord's policy on the structure itself, and in a NNN lease, tenants pay a share of the premium. This cost fluctuates with the insurance market.

Maintenance under a NNN lease typically covers building-wide systems: HVAC, roof, parking lot, exterior, and common mechanical systems. What is included and what is excluded from the maintenance net varies significantly from lease to lease. Some leases exclude major capital expenditures. Others include them. The lease document is the only authoritative source on this.

How NNN costs are estimated and reconciled

At the start of each lease year, landlords typically provide an estimate of NNN expenses. Tenants pay this estimated amount monthly, divided into twelve payments, added to the base rent. At the end of the year, the landlord compiles the actual costs and compares them to what tenants paid.

If actual costs were higher than estimates, tenants owe the difference in a lump sum or in installments. If actual costs were lower, tenants receive a credit against future payments or, in some cases, a refund. This annual reconciliation is a separate financial event that can significantly affect your cash flow if you have not budgeted for it.

The difference between NNN, NN, and N leases

A single net lease (N) passes only property taxes to the tenant. A double net lease (NN) passes property taxes and building insurance. A triple net lease (NNN) adds maintenance. You may also encounter the term "absolute net" or "bondable net," which transfers essentially all property expenses to the tenant, including major capital expenditures like roof replacement. Each structure represents a different allocation of financial risk between landlord and tenant.

Why this matters for your budget before you sign

The gap between advertised base rent and actual occupancy cost under a NNN lease can be substantial. The only way to know the realistic range is to request historical NNN cost data from the landlord, understand the pro-rata formula in the specific lease, and build your budget around actual occupancy cost rather than base rent alone.

This site does not provide legal advice. If you have questions about how a specific lease is structured, a licensed commercial real estate attorney in your state is the appropriate resource. The purpose of this article is to make the vocabulary and mechanics of NNN leases legible before you enter that conversation.