A net lease is a contract in which the tenant agrees to pay a predetermined price for rent as well as specified additional expenses associated with the property. These additional expenses can include property taxes, insurance, maintenance and repairs. How do you determine which of these costs the tenant is responsible for paying? Single, double and triple net leases exist to clarify which of these additional expenses are the tenant’s responsibility. Read on to discover the difference between single, double and triple net leases.
Single Net Lease
Single net leases are the least common type of net lease. In a single net lease, the tenant is responsible for paying all or a portion of the property taxes on the property in addition to the pre-established rental rate. While this financial responsibility shifts from the landlord to the tenant, most landlords still prefer the payment to pass through them to ensure the amount is correct and on time. Under a single net lease, the tenant assumes the least amount of financial responsibility for the space as possible within the limits of a net lease.
Double Net Lease
Under a double net lease, the tenant is now responsible for paying the property taxes and insurance for the space in addition to the established rental rate. All other expenses, such as maintenance and repairs, remain the landlord’s responsibility. Double net leases are particularly common in commercial real estate, and in most cases, landlords of larger commercial developments charge taxes and insurance expenses proportionally to the size of the leased space.
Triple Net Lease
A triple net lease removes the landlord from most if not all of the financial responsibility associated with the property. In a triple net lease, the tenant pays taxes, insurance, maintenance and repairs in addition to the rent. Triple net leases are commonly used for long-term periods (ten years or more) in freestanding commercial buildings leased to one tenant. Because this leasing method shifts the majority of additional expenses to the tenant, triple net leases typically have a lower rental rate.
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