Triple Net Lease of Control
Usually, when someone rents an apartment or a home, the property owner is responsible for maintenance and repairs. The renter's responsibility is to make regular payments and purchase insurance to cover potential liabilities. However, there are situations where the tenant covers the costs for everything. This form of lease is designated as a triple net.
What Is It Comprised Of?
A triple net lease, also known as a triple N or N-N-N agreement, puts the onus of responsibility entirely on the tenant. On top of paying the monthly rent, they’re responsible for maintenance and repairs on both the inside and outside of the property.
Where This Is Most Common?
This type of lease is not normally found within residential properties. Rather, it’s commonly used by owners of commercial buildings. It allows them to hold off insuring the entire complex. Instead, once someone rents out office space, they pass that responsibility onto them.
Once a triple N lease is signed, the renter is responsible for:
Maintenance of the space
Needed repairs for space
The purchase of rental insurance with comprehensive liability coverage
Utilities and communication services
Triple Net vs. Gross Lease
A gross lease is practically a reverse image of a triple net lease. Where the tenant pays practically everything in the latter, it’s the opposite in the former. On a gross lease, the building owner covers practically all expenses except the rent and customizable items needed by the office tenant.
In most triple N leases, a majority of the costs the tenant is responsible for are bundled into one payment. This is similar to how a homeowner pays their mortgage. In that scenario, they normally pay the principal, interest, property taxes, and HOA in one bill. For a tenant, the items not included are specialties for the company.
Triple Net Lease Pros and Cons
The largest pro for a building owner is savings. In addition to only insuring the portion of the building that is occupied, they can earn more revenue than expenses. As a result, they can return a large portion to the business for modernization and infrastructure improvements.
The con of a triple net lease is its cost to the tenant, especially when they are in financial straits. In many cases, the renter tries to get out of the agreement. This can lead to ongoing lawsuits and increased liabilities for the building owner if they don’t have proper insurance.