Introduction
When it comes to commercial real estate, there are several types of leases available, including the triple net (NNN) lease. NNN leases are becoming increasingly popular, but what exactly is included in them? In this article, we’ll explore the ins and outs of NNN leases and what tenants can expect.
What is a NNN Lease?
A NNN lease is a type of lease agreement in which the tenant takes on the responsibility of paying for all expenses associated with the property, including property taxes, insurance, and maintenance costs. This means that the landlord is not responsible for any of these expenses, and the tenant is responsible for making sure the property is in good condition.
What Expenses are Included in NNN Leases?
The expenses included in NNN leases can vary depending on the specific lease agreement. However, there are generally three main expenses that are included: property taxes, insurance, and maintenance costs.
Property Taxes
As mentioned, property taxes are one of the expenses that tenants are responsible for in a NNN lease. This includes any taxes that are assessed on the property, such as real estate taxes or property assessments. The amount of property taxes owed will depend on the value of the property and the tax rate in the area.
Insurance
In addition to property taxes, tenants are also responsible for paying for insurance on the property. This includes any insurance that is required by law, such as liability insurance, as well as any additional insurance that the tenant may choose to purchase.
Maintenance Costs
Finally, tenants are responsible for all maintenance costs associated with the property. This includes any repairs or maintenance that needs to be done, such as fixing a leaky roof or replacing a broken window. The tenant is also responsible for any routine maintenance, such as landscaping or cleaning.
What is Not Included in NNN Leases?
While tenants are responsible for many expenses in a NNN lease, there are some expenses that are typically not included. These include expenses that are not directly related to the property, such as marketing or advertising costs. Additionally, any expenses related to the landlord’s profits, such as management fees, are typically not included in NNN leases.
Pros and Cons of NNN Leases
There are both pros and cons to NNN leases, depending on the perspective of the landlord and tenant. Some of the benefits of NNN leases include:
Lower Rent: Because the tenant is responsible for many of the expenses associated with the property, the rent in a NNN lease is often lower than in other types of leases.
More Control: Tenants have more control over the property in a NNN lease, as they are responsible for maintaining it and making sure it is in good condition.
Tax Benefits: Tenants may be able to take advantage of tax benefits associated with owning a property, such as depreciation deductions.
On the other hand, some of the drawbacks of NNN leases include:
Higher Risk: Tenants take on a higher risk in a NNN lease, as they are responsible for all expenses associated with the property.
Less Flexibility: Tenants have less flexibility in a NNN lease, as they are responsible for all maintenance and repairs on the property.
Less Predictable Costs: Because tenants are responsible for all expenses associated with the property, costs can be less predictable in a NNN lease.
Conclusion
NNN leases can be a great option for tenants who are looking for lower rents and more control over their properties. However, they also come with additional risks and responsibilities. Understanding what is included in NNN leases is essential before signing any lease agreement. By doing so, tenants can make an informed decision and ensure that they are getting the best possible deal.
