Triple Net Lease (NNN)
A triple net lease (NNN) is a commercial lease in which the tenant pays base rent plus the property's three main operating costs: property taxes, building insurance and maintenance. Because the tenant covers most expenses, the landlord's income is more predictable, which makes NNN properties popular with investors seeking stable cash flow.
Why a triple net lease matters
In a triple net lease, rising operating costs pass through to the tenant. That shields the landlord's net operating income from increases in taxes, insurance and maintenance, which is why NNN income is often valued much like a bond backed by the tenant's credit.
The tenant's credit becomes the main risk. A single-tenant NNN property depends on one tenant paying rent, so underwriters focus on the tenant's financial strength, the remaining lease term and what the space would be worth if the tenant left.
Lease language matters. Responsibility for the roof and structure, capital repairs and expense caps varies widely, and some leases labeled triple net leave significant costs with the landlord.
Triple Net Lease vs. Gross Lease
In a triple net lease, the tenant pays taxes, insurance and maintenance on top of base rent. In a gross lease, the landlord pays those costs and sets a higher rent to cover them. Modified gross leases fall in between, splitting some costs between landlord and tenant.
Where it matters by property type
Triple net leases are standard in retail and industrial properties, and single-tenant NNN properties form their own investment category.
How Smart Capital Center handles triple net leases
Smart Capital Center's AI agents read each lease to confirm which expenses the tenant actually pays, check reimbursements against the operating statements, and reflect the true landlord costs in the underwriting model.
Frequently asked questions
What does a triple net lease tenant pay?
The tenant pays base rent plus its share of property taxes, building insurance and maintenance, often including common area maintenance. The exact scope depends on the lease. Some leases also make the tenant responsible for roof and structural repairs, while others leave those with the landlord.
Are triple net leases a good investment?
They can offer stable, predictable income, especially with a creditworthy tenant and a long remaining term. The main risks are the tenant's credit, the cost of re-leasing if the tenant leaves, and lease terms that leave more costs with the landlord than the label suggests.
What is an absolute net lease?
An absolute net lease, sometimes called a bondable lease, makes the tenant responsible for nearly all property costs, including the roof, structure and major capital repairs, with rent obligations that continue even if the property is damaged. It is the most landlord-favorable form of net lease.