Legal Definitions - net-net-net lease

A net-net-net lease, often referred to as a triple net lease, is a type of commercial real estate lease agreement where the tenant is responsible for paying not only the base rent but also most, if not all, of the property's operating expenses. These expenses typically include:

• Property taxes (the first "net")
• Building insurance (the second "net")
• All costs associated with maintenance and repairs (the third "net")

This arrangement shifts a significant portion of the financial burden and risk from the landlord to the tenant, making it a common structure for long-term commercial leases, particularly for single-tenant properties. The landlord's responsibilities under such a lease are typically minimal, often limited to structural repairs or major capital expenditures, though sometimes even these are passed on to the tenant.

Examples:

• Retail Pharmacy Chain: Imagine a large national pharmacy chain that wants to open a new store in a standalone building in a suburban shopping center. They enter into a net-net-net lease with the property owner. Under this agreement, the pharmacy chain pays a monthly base rent to the landlord. In addition, they are responsible for paying the annual property taxes assessed on the building, the premiums for the building's insurance policy, and all expenses related to the property's upkeep, such as HVAC system maintenance, roof repairs, parking lot resurfacing, and landscaping. The landlord's primary role is to collect the rent, while the tenant manages and pays for nearly all operational costs of the property.

  This illustrates a net-net-net lease because the pharmacy (tenant) is paying the "three nets" – property taxes, building insurance, and all maintenance/repair costs – on top of their regular rent, significantly reducing the landlord's ongoing financial obligations related to the property.

• Industrial Distribution Center: A major e-commerce company leases a vast warehouse facility to serve as a regional distribution center. The lease agreement is structured as a triple net lease. This means that beyond the agreed-upon monthly rent, the e-commerce company is obligated to pay the local property taxes for the warehouse, secure and pay for the building's insurance coverage, and handle all maintenance and repair expenses. This includes everything from routine cleaning and utility system checks to major repairs of loading docks, sprinkler systems, or the building's exterior. The landlord receives a predictable income stream without the day-to-day financial responsibilities of property management.

  This example demonstrates a net-net-net lease as the e-commerce company (tenant) bears the financial responsibility for the property's taxes, insurance, and all maintenance, allowing the landlord to have a more passive investment.

• Fast-Food Franchise: A franchisee of a popular fast-food restaurant leases a newly constructed building on a busy corner lot. Their lease is a net-net-net agreement. Consequently, in addition to their monthly rent payment, the franchisee is responsible for paying the property taxes levied by the municipality, the insurance premiums for the restaurant building, and all costs associated with maintaining the property in good condition. This includes interior upkeep, exterior painting, plumbing and electrical repairs, parking lot striping, and even snow removal in winter months. The landlord's financial involvement in the property's operational costs is minimal.

  Here, the fast-food franchisee (tenant) is clearly taking on the "three nets" – taxes, insurance, and maintenance – in addition to the base rent, which is the defining characteristic of a net-net-net lease.