PLZ explain "Fixed Tripple Nets" I have a landlord edvising they charged fixed NNN's with 3% annual increases

In Leasing Property - Asked by Mark R. - Oct 31, 2016
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Drew R.
Owner/Investor
Austin, TX

NNN is short for "triple net". It is a lease structure where the tenant is responsible for their pro-rata share of the property's operating expenses in addition to the base rental rate. The "fixed" prefix is implying that your base rental payments will be fixed. For instance, if the base rental rate is $10.00/sf, increasing by 3.0% per year, then you know that the base rate will be $10.30/sf in year 2, $10.61/sf in year 3 and so on. Remember that this does not include your share of operating expenses, which you would also be liable for under a NNN lease structure. You will want to request historic operating expenses and an estimate of your share so you may budget accordingly.

Nov 1, 2016
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Michael S.
Broker/Agent
Newport News, VA

We also have fixed the annual increases on our NNN charges. In our case this does not agree with Drew's answer. Over several decades we saw that on average NNN charges increased roughly 3% annually. As a result, and to simplify our lease for our tenants, we fixed our increases to be 3% annually. If your NNN charges were $2.50 per square foot per year, they would go up 3% annually, regardless of what we actually spent. The net result has been that Tenants can easily understand what their charges are going to be over the life of their lease, and are not faced with huge increases in a year where for example we had 5 extra days of snow removal. The next year, if we have no snow, it all works out. It is a risk for the landlord, but ultimately makes our less sophisticated tenants happier.

Nov 3, 2016
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Drew R.
Owner/Investor
Austin, TX

Very good point by Michael S. - The moral of the story here is to read your lease, review with the landlord and consult a tenant rep or an attorney if needed. The details of lease provisions can vary from market to market and landlord to landlord.

Nov 4, 2016
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