A net lease is a popular form of a commercial real estate lease where the tenant assumes certain financial responsibilities in addition to the pre-determined rental rate. Different variations of net leases exist to accommodate specific building expenses–single, double and triple net leases. The biggest difference between these net lease variations is how the additional expenses are divided between the landlord and the tenant. Here is everything you should know about double net leases.
What are the features of a double net lease?
In a double net lease, the tenant agrees to pay the property taxes and insurance fees in addition to the pre-determined rental rate. A double net lease gives the tenant more financial responsibility than a single net lease, but also requires the landlord to handle repairs and pay any necessary maintenance fees. In a multi-tenant building, the property taxes and premiums for property insurance can be split on a pro rata basis between the other tenants renting within the building.
What are the advantages of a double net lease?
Landlords may use a double net lease because it shifts most of the financial responsibility, and thus much of the organizational pressure and stress that comes with managing and paying multiple property expenses. However, as landlords remain responsible for the upkeep and maintenance of the property, they still assume a certain level of control over how the space is used and maintained. Additionally, tenants may opt for a double net lease because these contracts typically have a lower rental rate than a single net lease and less financial management than a triple net lease.
What are the considerations of a double net lease?
While a double net lease limits the financial risk for landlords, property taxes and insurance fees typically still pass through them to ensure these important expenses are paid correctly and in a timely manner. Accordingly, this can complicate this process instead of simplifying it. Additionally, tenants need to consider the property taxes and insurance fees and understand that the responsibility of these additional expenses may outweigh the lower rates in rent in some cases.
Interested in commercial real estate investment? Ground + Space is a leading commercial real estate brokerage firm that specializes in single-tenant and retail NNN investments. Contact us today to find out more about our current listings!