Double Net Lease Versus Triple Net Lease. What is the Difference?
Before a tenant and a landlord agree on a commercial property, the lease decision needs to get made. There are varying types of leases, and they all come with their advantages and disadvantages.
No matter the agreement, it is crucial for you to read and understand the lease details to make wise decisions. And know the road to take under given circumstances. The most common types of net leases include the double net and the triple net leases.
In this post, we discuss The Difference Between Double Net Lease and Triple Net Lease.
First, a net lease describes varying leases such as double net lease and triple net lease. These leases apply to varying property types such as industrial, retail, office, and healthcare.
A net lease provides an arrangement in terms of property expenses between a tenant and a landlord. Depending on the lease agreement, the tenant may have a fixed net lease. Or a variable monthly payment.
Double net leases
Popularly known as net-net or NN leases, double net leases are most common in commercial real estate. In this type of lease, the tenant pays insurance premiums, deductibles, and property taxes in addition to the monthly rent. The base rent payable for the property is generally lower due to the additional expenses the tenant must bear. However, all maintenance and ongoing upkeep costs remain the responsibility of the landlord.
In double net leases, the landlord has additional payments passed to them to make payments to the relevant authorities and insurance company. Even though the lease agreement includes these payments, the landlord's name is on the insurance and tax bill. That means that he is ultimately responsible for ensuring that missed or late payments by tenants get avoided by all costs.
The perks of double net leases
The main benefit of double net leases is that you do not have to worry about the stress of ensuring the building is well-maintained. And in perfect working condition. The costs associated with these can be considerable, and NN leases will allow you to avoid all these.
Triple net leases
Also referred to as NNN leases, triple net leases are more common among investors seeking long-term and reliable investments with consistent income at the end of each month. In this type of net lease, the landlord is absorbed of most risk of any net lease.
That means that in addition to rent, insurance premiums, deductibles, and property taxes, the costs associated with repairs and structural maintenance must get paid by the tenant. Since these extra expenses get passed on to the tenant, the landlord charges a lower base rate.
The perks of triple net leases
- Long-term occupancy
Most triple net lease agreements are long-term in nature. That is especially advantageous to the landlord since it eliminates the risk of having a property sit vacant between tenants.
- A consistent stream of income
As an investor, you get a consistent income since the property expenses get passed to the tenant. That protects you from risk in your investment.
- Low-risk investment
Since the tenant is solely responsible for nearly all the surrounding property costs, that makes triple net leases a considerably low-risk investment.
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