What is Triple Net Lease (NNN)?

A Triple Net Lease, often called an NNN lease, is a common type of commercial real estate lease. In this setup, the tenant pays a base rent plus three main "nets": property taxes, building insurance, and common area maintenance (CAM) costs. This means the tenant handles most of the property’s operating expenses. For landlords, NNN leases offer a more hands-off investment, as the tenant takes on many of the responsibilities and costs associated with owning the property. For tenants, NNN leases can provide more control over the property and its expenses, but they also come with greater financial obligations.

Understanding an NNN lease is important for both buyers and sellers of businesses that operate in leased spaces. For buyers, it means knowing the true cost of occupancy beyond just the base rent. For sellers, it impacts the profitability and attractiveness of their business to potential buyers, as the lease terms are a significant part of the business’s overhead. It also affects the valuation of the business, as a favorable or unfavorable lease can significantly impact cash flow.