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What is a Triple Net (NNN) Lease? The Hidden Costs of Commercial Rent

If you are looking for commercial space, you have likely seen listings advertising incredibly low monthly rates, followed by three letters: NNN. While that low "Base Rent" looks great on a budget sheet, signing a Triple Net lease means you are on the hook for significantly more than just the space itself.

The Three "Nets" Explained

In a commercial real estate lease, "Net" essentially means "Tenant Pays." In a Triple Net lease, the tenant agrees to pay a lower base rent, but assumes the financial responsibility for their share of three specific building expenses:

• Net 1: Property Taxes. You pay a prorated share of the building's annual property taxes based on the square footage you occupy.
• Net 2: Building Insurance. You cover your portion of the landlord's insurance policy for the structure itself (this is separate from your own business liability insurance).
• Net 3: Common Area Maintenance (CAM). You pay for the upkeep of shared spaces. This includes things like parking lot repaving, snow removal, landscaping, and lobby janitorial services.

How It Affects Your Bottom Line

Landlords love NNN leases because they pass the unpredictable operational costs of owning a building onto the tenants. If property taxes spike or a harsh winter requires extra snow plowing, the landlord's profit margin remains safe—the tenants absorb the extra cost.

For a business owner, this means your monthly rent is rarely a fixed number. If you negotiate a $20 per square foot base rent, your actual output could easily jump to $28 or $30 per square foot once the NNN fees are reconciled at the end of the year.

Protecting Yourself Before You Sign

The biggest mistake tenants make is budgeting only for the base rent. Before signing an NNN lease, always ask the broker or landlord for a detailed history of the building's CAM charges and property taxes over the last 3 years to accurately forecast your true monthly operating costs.