In the retail commercial lease what does the triple net NNN most of the time stand for?

In Leasing Property - Asked by Dao A. - Jun 23, 2012
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Answer(s)

Patrick S.
Broker/Agent
Anaheim, CA

The NNN are the Tenants portion of the Taxes, Insurance and Maintenance that the Owner pays on the property.

Jun 24, 2012
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Jeffrey T. C.
Appraiser
Huntsville, AL

There are several fundamental types of leases common to all real property. The types of lease are merely labels or tags and are merely for convenience sake. They are categorized as to who pays the expenses each year. Common expenses are taxes, property insurance, liability insurance, interior utilities, common area utilities, interior maintenance, exterior maintenance, common area maintenance, roof maintenance, HVAC maintenance, cleaning, reserves for replacement, management, etc.
Bear in mind that a lease is a contract and is binding. Thus, it may not fit into a neat category. The lease can be negotiated clause by clause until both parties agree and are willing to sign.
Three of the more common lease types are: gross lease, net lease and absolute net lease.
Bear in mind that the structure of the lease does not necessarily change the net income (NOI) to the landlord/lessee. For example, a Gross Lease where the seller pays all expenses except utilities may be set a rent of $20.00 oer SF per year. The major expenses are $4.00 per SF per year. The owner/landlord actually nets $16.00 per SF per year. If the tenant is willing to pay the $4.00 per SF, the seller will lease it for $16.00 per SF per year. There is no monetary difference.
A so-called triple-net lease or NNN lease is very common in office and retail properties. It basicly pertains to a net lease where the tenant pays for or reimburses the owner/landlord for property taxes, property insurance (and possibly liability insurance), and interior maintenance. Owners like this lease structure because they can advertise a lower rent quote since they are not paying the lion's share of the expenses (as they are in a gross lease). The owner/landlord nets the same (same NOI or Net Operating Income) and is nets the same by paying fewer expenses.
Much confusion arises in the real world because many brokers/agents treat a NNN lease as though it were an absolute net lease ie. a lease where the tenant pays EVERY conceivable expense, even a management expense. This leads to errors relative to the stated capitalization rate involved. Also, some brokers/agents utilize a "reserves for replacement" expense figure and some do not. Everyone must be on the same page. I see statements about NOI and cap rates that forget to account for 5% to 10% of the regular expenses in the property and this leads to errors in cap rate and NOI calculation.
JTC

Jun 24, 2012
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Radhika Sherry S.
Broker/Agent
Saratoga Springs, NY

A Triple Net Lease is also known as Net Net Net Lease or NNN Lease. This is a type of net lease in which the tenant pays all or part of the taxes, insurance, and maintenance associated with use of the property. These fees are paid in addition to the tenant's regular monthly rent.
Triple Net leases almost always favor the landlord and should be carefully negotiated to limit how much the landlord can increase NNN fees each year

Jun 24, 2012
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David B.
Lender/Mortgage Broker
Longmont, CO

The short answer is real estate taxes, insurance (property and liability), and Common Area Maintenance (CAM).
In a Triple Net (NNN) lease, the tenant generally pays the rent for the property plus expenses. The three "Nets" are the expenses that the Landlord pays for and passes through to the tenant. These are expenses that are not directly attributable to one tenant, but are shared by the entire center. Each tenant pays their pro rata share.
Be careful not to fall into the trap of assuming what this means in practice. Different Landlords have different ideas of what this means, especially CAM. Always get a detailed clarification from the Landlord. In the end, however, the tenant pays their share of all property expenses plus rent.
CAM usually includes, but is not limited to security for the property, landscaping, snow removal, trash removal, cleanup and maintenance of the common areas, such as exterior lighting, parking lot overlays and striping. Sometimes CAM includes roof repair, sometimes it includes HVAC maintenance, but many times the tenants will be responsible for those expenses directly.
CAM should not include most capital expenses (large ticket items that are amortized over a period of years), tenant improvements, brokerage fees and any other expenses that do not benefit the property in some way.
In addition to the Landlord's pass throughs, the tenant usually pays for utilities, janitorial service and any other expense that is confined to their space.

Jun 28, 2012
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Korey J.
Broker/Agent
Alpharetta, GA

NNN = Insurance, Taxes and CAM (Common Area Maintenance). Triple nets are commonly passed to the Tenants, who pays these based on the percentage of his occupancy.

Jul 1, 2012
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jean c.
Property/Asset Manager
Middletown, NY

Dear miss
I will do the best I can to relate to you my understanding of a triple NNN net lease to you, Then you let me know What is it, most of the time stands for. Such a lease, is the best contract in the commercial rea estate business betwen the two parties, owner or manager or tenant client. The owner mgt want to rent the building and keep it rentted , the client in the other hand want to keep the place if profitable and affordable, the triple net lease provide the realization of both of your goals. It is like a lease within a lease or a lease with option,the first part is sign for 20 years with the option to renew for another 10 years term with the option of another 5 years. Then start over if you really love each other that much.It is the best deal,everybody is happy and help one and other on things like tax maintenance etc....

Jul 6, 2012
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