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What is a net lease for a commercial property?

On Behalf of | Feb 24, 2022 | Commercial Leases

Commercial leases differ from residential leases in many ways. For example, a residential lease is usually a gross lease that the landlord uses to pay the mortgage, taxes, and insurance The renter is normally responsible only for paying for some or all of the utilities.

Most commercial leases are called “net leases” instead of gross leases. This provides a cheaper lease payment, but there are other things that the business has to pay. It’s imperative that the tenant’s responsibilities are spelled out in the lease. 

4 types of net leases

There are four types of net leases that are used for commercial properties:

  1. Single net lease: This is often denoted as an N lease. The tenant pays property taxes and their lease payment.
  2. Double net lease: It’s often called an NN lease. The tenant pays the lease payment along with insurance premiums and property taxes.
  3. Triple net lease: This is called an NNN lease. The tenant is responsible for the lease payment and the expenses related to the rental. This includes insurance, property taxes and maintenance costs.
  4. Modified net lease: This type of net lease is customized to fit the needs of the tenant and the landlord. It can include shared costs for the expenses common in the other net lease types.

Commercial leases must accurately reflect the terms the landlord and tenant agreed upon. Both sides should review the lease before signing it to ensure that it’s accurate and contains all the terms necessary. It’s usually best to have someone review the lease so you know that there’s nothing you missed that could come back to haunt you later.