Preparing to acquire locations? Avoid common mistakes. Read this best practices guide first.

Solutions
Platform

Lease Management Software

Lease Accounting Software

Artificial Intelligence

Assets & Contracts

Reporting & Analytics
Services

CAM & Tax Reconcilliation

Lease Abstraction
Industries

Food & Beverage

Hair & Beauty

Health & Fitness

Medtail

Petcare

Retail
Ready to learn more?

Watch our 2-minute demo video, or contact us to schedule a demo.

Book a Demo
Resources
Featured Story:

"Outmaneuvering the Competition: How Leasecake Helped Me Secure a Prime Location"

Read How >
Blog

Customer Stories

Guides

Webinars

Onboarding & Support
Ready to learn more?

Watch our 2-minute demo video, or contact us to schedule a demo.

Book a Demo
Pricing
Company
Company News

EMERGING Fund Backs Leasecake as Strategic Investor

Leasecake announces that EMERGING has joined as a strategic investor, closing the company's $10M Series A extension.
Read News
About

Careers

Contact

Partners
Ready to learn more?

Watch our 2-minute demo video, or contact us to schedule a demo.

Book a Demo

Solutions
Platform

Lease Management Software

Lease Accounting Software

Artificial Intelligence

Assets & Contracts

Reporting & Analytics

Industries

Food & Beverage

Hair & Beauty

Health & Fitness

Medtail

Petcare

Retail
Services

CAM & Tax Reconcilliation

Lease Abstraction

Ready to learn more?

Watch our 2-minute demo video, or contact us to schedule a demo.

Book a Demo
Resources
Blog

Customer Stories

Guides

Webinars

Onboarding & Support
Ready to learn more?

Watch our 2-minute demo video, or contact us to schedule a demo.

Book a Demo
Pricing
Company
About

Careers

Contact

Partners & Integrations
Ready to learn more?

Watch our 2-minute demo video, or contact us to schedule a demo.

Book a Demo
Login

Solutions
Platform

Lease Management Software

Lease Accounting Software

Artificial Intelligence

Assets & Contracts

Reporting & Analytics

Services

CAM & Tax Reconcilliation

Lease Abstraction
Industries

Food & Beverage

Hair & Beauty

Health & Fitness

Medtail

Petcare

Retail

Ready to
learn more?

Watch our 2-minute demo video, or contact us to schedule a demo.

Book a Demo
Resources
Blog

Customer Stories

Guides

Webinars

Onboarding & Support
Ready to
learn more?

Watch our 2-minute demo video, or contact us to schedule a demo.

Book a Demo
Pricing
Company
About

Careers

Contact

Partners & Integrations
Ready to
learn more?

Watch our 2-minute demo video, or contact us to schedule a demo.

Book a Demo
Login

Triple Net Lease (NNN) Explained

July 28, 2022
Taj.Adhav

This article will help you understand triple-net leases, as well as the top five things you should know before entering a triple-net lease to ensure that it is appropriately structured for your business goals.

Table of Contents

Triple net lease arrangements provide tenants with significant autonomy over property maintenance and management, allowing for direct control over the quality and timing of these services. If you are considering a retail lease for your business, you’ll likely encounter this term along with “net lease”. Despite the complex-sounding name, triple net leases are one of the most popular types of commercial leases. However, as the details of these leases vary by contract, it’s vital to understand what type of agreement you’re signing. This comprehensive guide not only delves into the essentials of triple net leases but also explores how mastering triple net lease investment can significantly benefit commercial real estate financial planning.

What is a Triple Net Lease (NNN)?

A triple net lease, (triple net or NNN) is a prevalent type of commercial real estate in the United States, especially for restaurant or retail franchises. This lease structure empowers franchisees with greater control over their space, albeit with the trade-off of assuming additional financial responsibilities.

Under a triple net lease, the tenant would assume the responsibility for paying not only the base rent but also the net expenses associated with the property. These expenses typically include three main costs: net real estate taxes, net building insurance, and net common area maintenance (CAM) charges. Here’s how these expenses break down, making you not just a tenant but an active participant in the property’s financial ecosystem:

Net Real Estate Taxes

The tenant pays their share of the property’s real estate taxes, assessed by local government authorities.

Net Building Insurance

The tenant obtains and maintains insurance coverage for the leased property, ensuring the building’s structure is covered.

Net Common Area Maintenance (CAM) Charges

The tenant takes on the costs for parking lot maintenance, landscaping, and security, ensuring the common areas are well-maintained.

Triple net leases are often attractive to restaurant and retail franchises because they provide more autonomy and control over the leased space. Nevertheless, it’s essential to carefully evaluate and contemplate the potential expenses and risks involved in taking on these extra financial obligations.

A definition of triple net leases (NNN), where tenants cover rent plus all operating expenses including insurance, taxes, and maintenance.

Key Distinctions Between Triple Net Lease (NNN) and Gross Lease

Understanding the differences between triple net (NNN) and gross leases is crucial for tenants and investors as it significantly impacts financial responsibilities and control over the leased space. Here are the core distinctions simplified:

Expense Responsibility

In a NNN lease, tenants are responsible for additional expenses beyond the base rent, including real estate taxes, building insurance, and common area maintenance (CAM) charges. This structure contrasts with a gross lease, where the landlord covers these operating expenses, offering tenants a fixed, all-inclusive rent amount.

Rent Structure

NNN leases typically feature a lower base rent since tenants cover the property’s operating expenses. This arrangement can lead to higher overall monthly costs but offers potential for negotiation and cost control. Conversely, gross leases provide a straightforward, fixed rent that includes all property expenses, simplifying budgeting for tenants.

Control and Autonomy

Tenants under NNN leases enjoy more autonomy over property maintenance and management, directly influencing the property’s upkeep and potentially the insurance policy. This level of control is less pronounced in gross leases, where the landlord assumes responsibility for property management, offering tenants a more hands-off approach.

By focusing on these pivotal differences, we understand that a triple net lease offers more control and potential cost savings for tenants willing to take on additional responsibilities, while a gross lease simplifies tenant expenses and reduces direct management tasks.

A definition of common lease types including triple net lease, modified gross lease and double net lease

Understanding the Full Spectrum of Triple Net Lease

Triple net leases offer a unique blend of benefits and challenges that are important for tenants and investors to understand fully. While they can provide significant advantages, it’s crucial to weigh these against the potential hurdles:

Benefits of NNN

Control Over Costs: One of the primary benefits of a NNN is the level of control it offers tenants over their operating expenses. This control allows for more predictable budgeting and potentially lower base rent compared to gross leases.
Customization Potential: Tenants have the freedom to customize the property to suit their business needs, often with the encouragement of property owners through incentives like credits or reduced base rent for improvements.
Financial Predictability and Negotiating Power: With a triple net lease, tenants can enjoy predictable expenses, giving them a clearer financial outlook and stronger negotiating power with landlords, acknowledging the tenant’s responsibility for additional expenses.
Operational Autonomy: Tenants gain significant autonomy over property maintenance and management, allowing for direct control over the quality and timing of these services.

Advantages of triple net lease as compared with other lease types

Understanding the Full Spectrum of Triple Net Lease

Triple net leases offer a unique blend of benefits and challenges that are important for tenants and investors to understand fully. While they can provide significant advantages, it’s crucial to weigh these against the potential hurdles:

Benefits of NNN

Control Over Costs: One of the primary benefits of a NNN is the level of control it offers tenants over their operating expenses. This control allows for more predictable budgeting and potentially lower base rent compared to gross leases.
Customization Potential: Tenants have the freedom to customize the property to suit their business needs, often with the encouragement of property owners through incentives like credits or reduced base rent for improvements.
Financial Predictability and Negotiating Power: With a triple net lease, tenants can enjoy predictable expenses, giving them a clearer financial outlook and stronger negotiating power with landlords, acknowledging the tenant’s responsibility for additional expenses.
Operational Autonomy: Tenants gain significant autonomy over property maintenance and management, allowing for direct control over the quality and timing of these services.

A graphic conveying the disadvantages of triple net leases (NNN) over other lease types

Challenges of Triple Net Lease

Variable Expenses: While the predictability of fixed costs is a benefit, tenants must also prepare for variable property expenses. Unexpected increases in real estate taxes, insurance, or maintenance costs can impact budgeting and cash flow.
Financial Risk: Taking on the responsibility for property expenses introduces financial risk, especially if costs rise unexpectedly. Tenants should conduct thorough due diligence to understand potential liabilities fully.
Limited Control Over Major Improvements: While tenants can customize the property, major structural changes or improvements typically require landlord approval, potentially limiting the tenant’s ability to fully tailor the space to their needs.
Dispute Potential: Clear and comprehensive lease agreements are essential to prevent disputes over expense allocations. Misunderstandings regarding who bears the cost for specific repairs or improvements can lead to conflicts.

While triple net leases are popular for their benefits, understanding the challenges is key to making informed decisions. Whether you’re a tenant considering a flexible and customizable commercial lease structure or an investor looking to diversify your portfolio, a comprehensive understanding of both the advantages and potential pitfalls of triple net leases will ensure you navigate these agreements successfully.

Unlocking the Potential of Triple Net Leases with Smart Management Tools

Entering into a triple net lease marks an exciting stage in running a business, though it can also feel overwhelming with the numerous details that need tracking.

Leasecake was designed to solve just that problem. By storing lease data and related documents, as well as sending reminders about critical dates, Leasecake helps manage your leases and comply with ASC 842 standards.

Schedule a free consultation to see if Leasecake is the right fit for your business, and we’ll review your lease management needs.

Request a demo for the use Leasecake's leasing software for managing triple net lease agreements and others

Picture of Taj Adhav

Taj Adhav

Taj Adhav is the Founder of Leasecake, an award-winning real estate management platform. With experience in accounting, Disney Imagineering, and tech, Taj simplifies location management for multi-unit operators in the retail and restaurant industries.

Share:

Recent Posts

Unlocking Growth: How Leasecake Puts Financial Transparency at Your Fingertips

Three Reasons Why Every Franchisor Needs a Lease Management System to Stay Competitive

How Leasecake Simplifies M&A Due Diligence, Buybacks, and Portfolio Growth

5 Ways to Increase Success as a Multi-Unit Franchise Owner

Should You Sign That Lease (or Renewal)? How to Make the Right Choice for Your Business

PrevPrevious Blog PostLandlord Offering a Tenant Improvement Allowance? Here’s What You Need to Know

Next Blog PostLeasecake Is a Leader in G2’s Quarterly Reports for Fall 2022Next

Let us help make
lease management
a piece of cake.

Let us help make lease management a piece of cake.

Linkedin Youtube Vimeo

Solutions

Lease Management
Lease Accounting
Artificial Intelligence
Assets & Contracts
Reporting
Lease Abstraction

Company

About
Careers
Partners
Press
Contact

Resources

Blog
Customer Stories
Help Center
Submit a Ticket

Legal

Privacy Policy
Terms of Service
Cookie Policy
Security Overview

Copyright © 2025 Leasecake Inc. All Rights Reserved. Patent Pending

WATCH DEMO

Watch a 2-minute
overview

By continuing, you authorize Leasecake to send marketing to the email address above.

Location management made easy.

We protect your locations so you can focus on growing your business.

Our easy-to-use solution ensures you never risk losing a location.
Modern solution to manage every aspect of location obligations.
The only solution designed specifically for restaurant and retail franchises.
Leading AI-enabled technology.

Book a Meeting to Get Your Custom Quote