What Does NNN Mean on Rental Property?
NNN on a lease is an acronym for triple net lease. A triple net lease is a rental contract on commercial property that spells out the responsibilities of the business leasing the property or space. Triple net leases are the most common form of commercial property lease.
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Identification
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A triple net lease may be identified as a NNN lease or a net-net-net lease. The renter who has a triple net lease must pay the property taxes, insurance and maintenance costs on the commercial property as well as the rent. NNN leases are mainly long-term leases of large commercial properties. They can also be used for smaller commercial spaces with lease terms of two years and longer.
Effects of a NNN lease
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A business that signs a triple net lease must budget for the additional expenses. The property owner can provide information on the taxes and maintenance costs. The insurance will depend on the building and type of business.
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Property Owner Benefits
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The property owner with a triple net lease arrangement knows more of the rental payment will go toward his return because none goes to pay other building expenses. An NNN lease turns the responsibility to pay those costs over to the renter. If the additional costs increase, the property owner is not affected and the net rental payment remains the same.
Potential Problems
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It's important that the renter understand the terms of the lease. If the renter fails to pay the taxes and/or insurance, the repercussions could fall back on the property owner.
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References
- Photo Credit urban building image by Ritu Jethani from Fotolia.com
