If you’re a landlord or thinking about diving into commercial real estate, chances are you’ve heard the term triple net lease thrown around. Maybe it came up in a conversation with a broker, or you spotted it in a listing and thought, “Sounds complicated - what does that actually mean?” You’re not alone.
The truth is that triple net leases (a.k.a. NNN leases) are one of the most common lease structures in commercial property, with $1.7 billion worth of these kinds of deals being packaged and sold to investors in 2024 alone. However, they’re often misunderstood - especially by landlords who are more familiar with residential rentals. Misunderstanding them can mean leaving money on the table or stepping into something riskier than expected.
So, what’s actually included in a triple net lease, and what makes it different from a gross lease or a modified gross lease? What are the benefits for landlords, and just as importantly, what are the risks? That’s the focus of this article, in which we cover everything you need to know, as well as what to consider before adding one to your portfolio.
What Is a Triple Net Lease?
So, let’s start with the basics: What is a triple net lease?
A triple net lease, often abbreviated as NNN lease, is a type of commercial lease where the tenant agrees to pay not just the base rent but also three additional expenses: property taxes, property insurance, and property maintenance. That’s where the “triple net” name comes from: three “nets” of cost that the landlord usually doesn’t have to cover.
This setup is most common in commercial real estate leases, especially for things like retail stores, office buildings, and industrial spaces. It’s also popular with long-term lease agreements where tenants want more control over the property and landlords want less of the day-to-day responsibility. We’ll get into how NNN leases compare to gross and modified gross leases a little later, but one of the main appeals of the triple net structure is its predictability.
The tenant typically gets a lower base rent up front (again, more on that later), and the landlord enjoys steadier cash flow since they’re not covering fluctuating operating costs. To maintain this predictability, accurate property management accounting is crucial for staying on top of these expenses and ensuring everything runs smoothly."
Pro Tip: A well-structured triple net lease agreement can reduce your operating headaches, but make sure you clearly define which expenses the tenant is responsible for to avoid disputes later.
How Does a Triple Net Lease Work?
A triple net lease might sound complicated, but the core idea is pretty straightforward once you break it down. In this lease structure, the tenant agrees to cover three major operating costs:
- Property taxes
- Property insurance
- Property maintenance
All of this is on top of their regular base rent. Unlike a gross lease, where the landlord covers most of these costs, the tenant in a triple net arrangement takes on the bulk of the financial responsibility. That’s why NNN leases often come with lower base rent: because the tenant is absorbing more risk.
Here’s how it usually works in practice:
- The tenant pays monthly rent, just like in any other lease agreement.
- However, they also pay the “net” expenses, either directly to the service providers or through reimbursements to the landlord.
- The exact setup depends on how the lease is written.
You’ll most often see triple net leases in commercial real estate involving single-tenant properties. Think chain stores, restaurants, medical offices, and bank branches. These lease terms are usually long (10+ years), which creates income stability for the property owner.
A solid triple net lease agreement should clearly define:
- What the tenant is responsible for
- How shared costs are calculated
- Whether any caps or escalations apply
- What kind of documentation or proof is required
Because the tenant takes on more control of the building’s upkeep, it also frees up the landlord, especially if they’re managing multiple commercial properties. But it’s not totally hands-off. If the tenant doesn’t pay a tax bill or lets the property fall into disrepair, it’s still the landlord with their name on the title.
Pro Tip: Always require proof of payment for insurance and taxes in a triple net lease, as it protects you if a tenant fails to uphold their end of the deal.
The Benefits of Triple Net Leases
Something that you have to know before entering a triple net lease is that it comes with risk, but it also offers some clear advantages, especially from the landlord’s perspective. Here’s why so many commercial real estate investors seek out these deals.
Reduced Landlord Responsibility
One of the biggest draws of a triple net lease is how hands-off it can be. Because the tenant takes on things like property maintenance, real estate taxes, and property insurance, the landlord can step back from day-to-day management.
Predictable Cash Flow
When expenses are passed through to the tenant, your monthly rent becomes far more predictable. You’re less exposed to seasonal maintenance costs or tax increases, and that consistency can make budgeting (and sleeping at night) a lot easier.
Lower Risk of Overhead Surprises
Because you're not footing the bill for rising property costs, you're better protected from cost overruns. Your tenant handles all of those increases instead, which shields your real estate portfolio from some financial volatility.
Long-Term Stability
Most triple net leases are long-term (10 years or more). That means fewer turnover headaches, more reliable income, and fewer chances to have a vacancy disrupt your returns, which is why staying on top of property finances is crucial. This is especially valuable if you’re planning for retirement income or want to reduce the hands-on nature of your property management.
Pro Tip: Just because a lease is “hands-off” doesn’t mean it’s risk-free. Check your tenant’s credit and business history before signing a long-term NNN lease.
Related: Why You Should Invest in Long-Term Rentals?
What Are the Risks Associated with a Triple Net Lease?
As we just mentioned, while a triple net lease can be a real advantage for landlords, it’s not without its downsides. Like any lease type, it shifts responsibilities, but in this case, a lot of those responsibilities fall to the tenant. And when things go wrong, they can go really wrong.
Here are the biggest risks you’ll want to watch for:
- Lack of Maintenance - Since the tenant is responsible for upkeep, it’s possible they’ll cut corners or neglect your commercial property to save money. If the lease agreement isn’t clear about maintenance standards—or if you’re not monitoring things—the property could deteriorate and lose value.
- Tenant Default - With so many financial responsibilities on the tenant, a triple net lease only works if they can actually afford to meet them. If they default, you’re not just losing rent - you may also face unpaid real estate taxes, lapsed property insurance, or deferred repairs.
- Long Lease Terms - As we’ve covered, triple net leases are often long-term, which is great when the tenant is strong. But if their business fails or you need to reposition your investment, you could be stuck with a lease that no longer serves you.
- Market Risk -Because base rent is usually lower in NNN leases, you might not keep up with local market increases. If monthly rent stays flat while costs rise, your returns may lag behind comparable commercial real estate.
- Passive ≠ Hands-Off - It’s easy to assume that a triple net lease is totally passive. It’s not. You still need to monitor compliance, review documentation, and stay alert to red flags.
Pro Tip: Build in inspection rights and reporting requirements so you can spot issues early, even if you have a long-term lease with stable tenants.
Types of Net Leases Explained
Of course, NNN leases aren’t the only type you’re going to encounter, so it pays to understand the different kinds that exist. While the triple net lease gets the most attention, it’s part of a broader family of net lease structures, each with different responsibilities for both parties.
Here’s a quick breakdown of what you need to know.
Single Net Lease (N Lease)
In a single net lease, the tenant pays base rent plus real estate taxes. The landlord still covers property insurance and maintenance. These are relatively uncommon today but still pop up in certain commercial lease scenarios.
Double Net Lease (NN Lease)
With a double net lease, the tenant pays base rent, property taxes, and property insurance, while the landlord remains responsible for property maintenance. This version is more common than a single net but still not as widely used as the triple net option.
Absolute Net Lease
Sometimes called a “hell or high water lease,” this is the most extreme form of net lease. The tenant assumes all costs: rent, maintenance, repairs, rebuilds after disasters, and everything in between. The landlord’s role is almost entirely passive. These are rare and usually used only with major, creditworthy tenants in long-term deals.
Pro Tip: If you're negotiating a net lease, don’t just focus on base rent. Make sure you understand exactly who’s paying for what behind the scenes, including taxes, repairs, insurance, and shared building costs.
Related: How ACH Payments Simplify Rent Collection for Landlords and Tenants
Manage Triple Net Leases with Confidence Using TenantCloud
As we’ve covered in this article, triple net leases offer a unique mix of benefits and responsibilities. For landlords, they can mean predictable income, reduced overhead, and a more passive investment structure—but they also require clarity, diligence, and smart lease management. If roles and costs aren’t clearly defined, those benefits can quickly turn into risks.
That’s where TenantCloud comes in. Our property management platform gives landlords the tools they need to stay on top of commercial lease agreements, whether that’s by helping you drafting lease terms, storing and sharing documents, or keeping a clear communication history with tenants. Our software is designed to reduce friction so you can focus more on growing your portfolio and spend less time on chasing paperwork.
So, if you’re managing one property or many, TenantCloud helps simplify the process. Explore the platform today, or reach out to our team directly at 1-737-300-9331 to learn how we can support your property goals.
