Net Lease: Different Types and Examples
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A net lease is a commercial lease agreement where the tenant pays base rent and some or all property-related expenses, such as taxes and maintenance. It benefits both landlords and tenants. Tenants have more control over operational expenses and are frequently responsible for property maintenance, while landlords benefit from consistent rental income and fewer property management duties. Let us learn more about net lease in the blog below.
What is a Net Lease?
A net lease is a legal contract for leasing commercial real estate. In this type of lease agreement, the tenant pays for both the rental space and additional expenses that may include:
- Utilities
- Repairs
- Property taxes
- Insurance
- Landscaping
- Snow removal
Net leases are very appealing to landlords because landlords can split the property's costs with the tenant. Tenants may also benefit from net leases because typically rent payments are lower due to the additional costs associated with the lease.
There are four different types of net lease:
- Single net lease
- Double net lease
- Triple net lease
- Modified net lease
Triple net leases are the most common type of net lease, and often if you hear the term "net lease," it refers to a triple net lease.
Net leases are negotiable, and it is crucial to ensure that all aspects of the agreement are documented in a detailed lease agreement. Tenants can include caps on their net lease agreement that set a maximum amount they are responsible for paying.
Click here for more information about net leases.
Difference Between Gross Lease and Net Lease
A gross lease, sometimes called a "full-service lease," is the opposite of a net lease and is most commonly found in residential real estate or when a single building shares multiple tenants. In a gross lease, tenants are only responsible for a set rent payment, and then the property owner is responsible for all additional fees and expenses. Some gross leases will stipulate that the tenant is required to pay utilities; however, the landlord almost always covers the following costs:
- Property taxes
- Insurance
- Maintenance
- Repairs
When operating under a gross lease, landlords tend to charge more for rent than a net lease because the landlord is taking on all responsibilities for additional expenses.
Gross leases are appealing for tenants because they have the simplicity and consistency of a set rent payment every month. In addition, the tenant isn't responsible for any property maintenance or repairs.
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Types of Net Leases
There are four types of net leases. It is common to see all of them used in commercial real estate; however, a triple net lease is the most common.
- Single Net Lease: A single net lease, also called an N Lease, requires that the tenant pay rent and property taxes. This is the net lease with the least amount of risk for the tenant because the taxes are paid through the landlord, who ensures that the tax payments are made on time.
- Double Net Lease: In a double net lease, or an NN lease, the tenant pays rent, property taxes, and insurance on the property. The landlord is responsible for all maintenance and repairs on the property. Like in a single net lease agreement, taxes and insurance are usually paid directly to the landlord, ensuring that the payments go to the correct places on time.
- Triple Net Lease: When operating under a triple net lease, or an NNN, the tenant pays rent, property taxes, insurance, and additional expenses. This lease provides landlords with the least amount of responsibility for the property. Generally, the base rent will be considerably less in this type of lease because the tenant has to pay for all additional expenses associated with the property.
- Modified Net Lease: A modified net lease falls somewhere between a triple net lease and a gross lease. This type of lease has special conditions in which the terms are negotiated to suit the needs of both the landlord and the tenant.
Considerations for a Net Lease
The following are the factors to keep in mind for a net lease:
- Maintenance and Repairs: By asking this question, determine who is in charge of property maintenance and repairs. Tenants frequently handle maintenance and repairs in triple-net leases. Therefore, it's vital to create clear expectations for these duties.
- Rent Structure: Recognise the rent structure, including the base rate sum and any escalations or rent increases during the leasing duration. Ensure one can pay the rent and that it is reasonable for the market.
- Lease Term: Determine the lease term's length, considering any potential extensions. When choosing the lease period, consider the long-term business ambitions and the consistency of the income.
- Rent Escalations: Recognise how rent increases are determined and when they occur. Fixed increments, percentage increases, and adjustments based on the Consumer Price Index (CPI) are normal tactics.
- Maintenance and Repairs: It is essential to decide the property renovation and maintenance price by asking this query. Tenants frequently handle maintenance and repairs in triple-net leases. Therefore, it's necessary to create clear expectations for these duties.
Net Lease Examples
Two examples of net leases can include single-tenant net leases and multi-tenant net leases. Both of these lease agreement examples provide the landlord and tenant with unique benefits.
Single-Tenant Net Lease Example
A single tenant net lease is often a triple net lease and is abbreviated to "STNL" or "NNN." In this lease agreement, the entire property is leased to only one lessee, and the lessee is solely responsible for all property expenses . In this situation, the landlord has little to no responsibility regarding the property.
This type of lease is often seen in real estate investments where the owner doesn't actively manage the property. A benefit of this type of lease is that they are often long-term leases with terms of 10 or more years.
Single-tenant net leases are most often seen utilized for the following property types:
- Fast food restaurants
- Office space leases
- Convenience stores
- Gas stations
- Big box stores
- Banks
- Warehouses
- Retail stores
Multi-Tenant Net Lease Example
Multi-tenant net leases are usually double net lease agreements and are used when one building has more than one tenant. Each tenant will have their own net lease agreement with the landlord in which the tenant pays rent, property taxes, and insurance.
Examples of properties that commonly have multi-tenant net leases include:
- Retail strip malls
- Shopping malls
- Apartment complexes
- Healthcare centers
- Office buildings
Landlords generally see higher yields from a multi-tenant property; however, more work is involved because the landlord has to manage several leases and is still usually responsible for maintenance and repair costs for the property.
Multi-tenant lease agreements tend to be for shorter durations than single-tenant agreements, and it is rare to see a multi-tenant lease agreement longer than seven years.
When to Use a Net Lease
Net leases are most commonly used by real estate investors who want to buy properties and reap the financial benefits of real estate ownership without the work of maintaining a property. For this reason, a landlord doesn't mind accepting a lower rent payment because they don't have the headache of property management.
Essentially, property owners use net leases to shift the burden and responsibility of taxes, insurance, maintenance, and repairs to the tenant. In return, the tenant pays a reduced rental rate and usually benefits from a long-term lease.
Read this article for more information about when to use a net lease.
Inclusions in a Net Lease
Net lease agreements can be negotiated, so both the landlord and the tenant are accommodated. It is essential to ensure that the net lease agreement details all negotiations and clearly documents who is responsible for what expenses.
Lease agreements will vary depending on the landlord, tenant, and property type; however, most leases include the following essential terms:
- Agreement Date: Date the agreement is made
- Names and contact information for the landlord and the tenant
- The physical address of the property to be leased
- Property Description: A description of the property, including square footage
- Property Use: A description of what the tenant's use of the property will be
- Lease Term: When the lease will begin, end, and renewal options
- Rent Payments: Amount and frequency the tenant will pay rent including what constitutes late rent and amount of late fee if any
- Rent Increases: Information about rent increases
- Security Deposit: Security deposit requirements
- Insurance coverage the tenant is required to maintain
Because this document is so important and must be written correctly, many landlords consult with a real estate lawyer to ensure the lease agreement includes all necessary terms.
Benefits of Engaging a Lawyer for a Net Lease
A net lease is a commercial real estate lease that can benefit from seeking legal counsel in several ways. Net leases are intricate legal contracts that need considerable thought and discussion to safeguard the interests of both landlords and tenants. Here are some major advantages of hiring a lawyer for the net lease:
- Legal Knowledge: Attorneys are qualified and skilled in analyzing and creating contracts, especially business leases. They may guarantee the leasing agreement complies with all applicable rules and legislation.
- Support During Negotiations: An attorney can advocate for the rights during lease talks, assisting in obtaining favorable terms and circumstances. They can also advise an individual on what conditions are typical in the sector and whether any concessions are possible.
- Risk Assessment: Lawyers can help to comprehend the potential legal ramifications of specific conditions and assess the risks involved with the lease. This includes recognizing potential risks and offering solutions to reduce them.
- Customization: A lawyer can modify the contract to suit the needs and goals since each commercial lease differs. They can create specific phrases and provisions that safeguard the interests.
- Clarity and Understanding: To ensure that you completely comprehend the rights and obligations under the lease, lawyers can explain any confusing legal jargon in the lease agreement.
- Due Diligence: To confirm property titles, zoning laws, and other legal requirements, the lawyer can perform due diligence. By doing this, one can make sure that the lease you sign has a solid legal foundation.
- Tax Law Compliance: Certain property-related expenses are frequently shared in net leases. Lawyers can offer guidance on the tax ramifications of these agreements and assist in structuring them to minimize taxes.
- Resolution of Disputes: If there is a disagreement between the landlord and the tenant, a lawyer can defend the interests and assist in settlement negotiations. They can also help one navigate the relevant legal procedures.
Final Thoughts on Net Leases
In commercial real estate, net leases are essential for businesses' survival and expansion and landlords' capacity to hold onto lucrative assets. Stakeholders can successfully negotiate this leasing structure and accomplish their long-term goals in the dynamic world of commercial property management and tenancy with a complete understanding of the subtleties of net leases.
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ContractsCounsel is not a law firm, and this post should not be considered and does not contain legal advice. To ensure the information and advice in this post are correct, sufficient, and appropriate for your situation, please consult a licensed attorney. Also, using or accessing ContractsCounsel's site does not create an attorney-client relationship between you and ContractsCounsel.
Meet some of our Net Lease Lawyers
Anand A.
Anand is an entrepreneur and attorney with a wide-ranging background. In his legal capacity, Anand has represented parties in (i) commercial finance, (ii) corporate, and (iii) real estate matters throughout the country, including New Jersey, Pennsylvania, Delaware, Arizona, and Georgia. He is well-versed in business formation and management, reviewing and negotiating contracts, advising clients on financing strategy, and various other arenas in which individuals and businesses commonly find themselves. As an entrepreneur, Anand is involved in the hospitality industry and commercial real estate. His approach to the legal practice is to treat clients fairly and provide the highest quality representation possible. Anand received his law degree from Rutgers University School of Law in 2013 and his Bachelor of Business Administration from Pace University, Lubin School of Business in 2007.
"Anand was a pleasure to work with! He was very thorough and professional."
Daehoon P.
Daehoon P.
Corporate, M&A & Securities Lawyer | Managing Attorney, DP Counsel PLLC Practice Areas: Business Formation | Commercial Contracts | Contract Drafting & Review | Mergers & Acquisitions | Venture Capital | Securities Offerings | Franchise Law | Employment & Equity Compensation | Intellectual Property | Cross-Border Transactions About/Bio: I represent companies, investors, and fund sponsors in corporate transactions, commercial contracting, and private securities matters, from entity formation and early-stage financings to acquisitions, exits, and ongoing strategic counsel. As Managing Attorney of DP Counsel PLLC, I help clients structure transactions clearly, allocate risk thoughtfully, and move deals forward with documentation that is practical, enforceable, and aligned with business objectives. My practice includes both day-to-day commercial matters and more complex transactional work, including venture financings, private offerings, M&A deals, fund-related documents, and cross-border structuring. What I Do: Corporate & Commercial • Entity formation and structuring for corporations, LLCs, and limited partnerships • Operating agreements, shareholder agreements, and governance documents • Commercial contract drafting, review, and negotiation • Vendor, distribution, manufacturing, SaaS, and licensing agreements • Employment, consulting, confidentiality, and equity compensation agreements • Outside general counsel support for growing companies Securities & Private Capital • Private offerings under Regulation D and Regulation S • Private placement memoranda, subscription agreements, and investor documents • SAFE, convertible note, and priced equity financings • Venture capital and private fund formation matters • Fund governing documents and offering document packages • Securities law analysis for private capital raising transactions Mergers & Acquisitions • Letters of intent and term sheets • Stock purchase, asset purchase, and merger agreements • Due diligence coordination and transaction support • Disclosure schedules, closing documents, and post-closing matters • Earnouts, rollover equity, indemnity structures, and related deal terms • HSR, CFIUS, and related regulatory issue spotting for qualifying transactions Digital Assets & Emerging Technologies • Federal-law digital asset and token securities analysis • Entity structuring for blockchain and Web3 ventures • Digital asset fund and operating structures • AML/KYC documentation support and regulatory issue spotting Franchising • Franchise Disclosure Documents (FDDs) • Franchise agreements • Master franchise and area development agreements • Franchise structuring and registration coordination Real Estate Transactions • Commercial real estate acquisitions and dispositions • Real estate joint ventures and syndications • Commercial lease drafting and negotiation • Real estate investment structures and related offering documents Cross-Border & International • U.S. market entry and entity structuring for international clients • Delaware and multi-entity holding structures • Cross-border transaction planning and documentation • Coordination with foreign counsel and tax advisors on cross-border matters Why Clients Hire Me: • Big-law-level drafting with boutique responsiveness • Practical, business-focused advice grounded in execution reality • Clear scoping and transparent fee arrangements • Experience across financings, acquisitions, fund formations, and cross-border transactions Typical Projects: • Contract drafting and negotiation • Entity formation and governance packages • Private offering document suites • Venture financing documentation • M&A transactions from LOI through closing • Fractional or outside general counsel support Industries Technology | SaaS | FinTech | Digital Assets | E-commerce | Healthcare | Real Estate | Food & Beverage | Professional Services
"Daehoon drafted a co-op sublease for my New York apartment. He was thorough, responsive through several rounds of revisions, and gave me a clear checklist of everything the package needed. Would definitely recommend."
Scott S.
I specialize in business law and contracts, with an emphasis on commercial transactions and negotiations, document drafting and review, employment, business formation, e-commerce, technology, healthcare, privacy, commercial real estate, data security and compliance. Specifically, I've drafted, reviewed and/or negotiated thousands of MSA's, NDA's, TOS', SAAS, sales, service, managed services, referral, reseller, royalty, finder’s fee, employment, contractor, consulting, advertising, marketing, manufacturing, distribution, management, artist, author, agency, photography, rental, lease, vendor, partnership, website, platform, application, privacy, non-compete, non-circumvent, confidentiality, IP ownership and licensing agreements so I'm very familiar with these types of documents. Practicing law since 2006, I worked in-house before starting my own solo practitioner law firm in 2011. I've worked with individuals and start-ups, Fortune 500 companies, and every type of entity in between, always providing quality legal work that fits the exact needs of the person and/or business. I’m a graduate of the Benjamin Cardozo Law School and also have an English degree from Penn.
"Scott helped me reviewed the contracts and saved me from getting into a trap of an outsourced sales services provider from Philippines and Australia"
Nicholas M.
Nicholas Matlach is a cybersecurity expert (CISSP) and an attorney who is dedicated to helping small businesses succeed. He is a client-focused professional who has a deep understanding of the challenges that small businesses face in the digital age. He also provides legal counsel to small businesses on a variety of issues, including formation, intellectual property, contracts, and employment law.
"Enjoyed his demeanor. Professional yet down to earth. The document created for me was very explicit and easy to read. I would recommend :)"
Ryenne S.
My name is Ryenne Shaw and I help business owners build businesses that operate as assets instead of liabilities, increase in value over time and build wealth. My areas of expertise include corporate formation and business structure, contract law, employment/labor law, business risk and compliance and intellectual property. I also serve as outside general counsel to several businesses across various industries nationally. I spent most of my early legal career assisting C.E.O.s, General Counsel, and in-house legal counsel of both large and smaller corporations in minimizing liability, protecting business assets and maximizing profits. While working with many of these entities, I realized that smaller entities are often underserved. I saw that smaller business owners weren’t receiving the same level of legal support larger corporations relied upon to grow and sustain. I knew this was a major contributor to the ceiling that most small businesses hit before they’ve even scratched the surface of their potential. And I knew at that moment that all of this lack of knowledge and support was creating a huge wealth gap. After over ten years of legal experience, I started my law firm to provide the legal support small to mid-sized business owners and entrepreneurs need to grow and protect their brands, businesses, and assets. I have a passion for helping small to mid-sized businesses and startups grow into wealth-building assets by leveraging the same legal strategies large corporations have used for years to create real wealth. I enjoy connecting with my clients, learning about their visions and identifying ways to protect and maximize the reach, value and impact of their businesses. I am a strong legal writer with extensive litigation experience, including both federal and state (and administratively), which brings another element to every contract I prepare and the overall counsel and value I provide. Some of my recent projects include: - Negotiating & Drafting Commercial Lease Agreements - Drafting Trademark Licensing Agreements - Drafting Ambassador and Influencer Agreements - Drafting Collaboration Agreements - Drafting Service Agreements for service-providers, coaches and consultants - Drafting Master Service Agreements and SOWs - Drafting Terms of Service and Privacy Policies - Preparing policies and procedures for businesses in highly regulated industries - Drafting Employee Handbooks, Standard Operations and Procedures (SOPs) manuals, employment agreements - Creating Employer-employee infrastructure to ensure business compliance with employment and labor laws - Drafting Independent Contractor Agreements and Non-Disclosure/Non-Competition/Non-Solicitation Agreements - Conducting Federal Trademark Searches and filing trademark applications - Preparing Trademark Opinion Letters after conducting appropriate legal research - Drafting Letters of Opinion for Small Business Loans - Drafting and Responding to Cease and Desist Letters I service clients throughout the United States across a broad range of industries.
"Ryenne took her time to read through our lengthy purchase agreement with us and explained each section in detail. She also answered any questions I had along the way. Very satisfied with her knowledge and approach on our agreement."
Dominick B.
Dominick Brook has been a licensed attorney in Ohio for the last 16-years. Prior to founding Brook Law, he served as the Director of Real Estate at Ohio University, negotiating and structuring complex transactions to align the University’s real estate portfolio with its mission. For over a decade before Ohio University, Dominick was a Senior Manager at Ernst & Young and served as a trusted business advisor for clients ranging from Fortune 10 companies to high-tech start-ups. Earlier in his career, he worked as a research analyst with Ohio University’s Voinovich School and served as an adjunct instructor of economics at Ohio University. Dominick is a graduate of the University of Edinburgh in Scotland (Masters of Economics and Politics), Ohio University (Masters of Political Science), and the Ohio State University's Moritz College of Law (Juris Doctorate). He is a Governor-appointed Ohio Commodore to aid in the attraction of businesses to Ohio, is a member in three angel investment funds, and served on the Athens County Port Authority.
Joshua D.
I am an experienced small business attorney. I work diligently to ensure that small business owners achieve their objectives while maintaining compliance, satisfying legal duties, and engaging in smart contracting opportunities. I provide everything from organization, to lease/commercial real estate purchase agreement review and negotiation, and even IP filings. I can help to navigate commercial and government contracts, as well as other SaaS-type agreements.
"Joshua is a phenomenal attorney to work with. He has a personality and isn't monotone to converse with. He is extremely responsive and delivers timely. He answered all my questions, while fairly abiding by the scope of representation. I would work with him again."
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Net Lease
Maryland
Is the landlord responsible for maintenance and repairs in a net lease agreement?
I recently signed a net lease agreement for a commercial property, and I am unsure about the extent of my responsibilities as a tenant when it comes to maintenance and repairs. The lease states that I am responsible for all operating expenses, but I want to clarify if this includes regular maintenance and repairs, or if those obligations fall on the landlord. I want to understand my rights and obligations before I proceed with any costly repairs or maintenance tasks.
Sara S.
Hi, Your responsibilities as a tenant will be identified in the lease. Such responsibilities will probably include some maintenance and repairs while the landlord is likely responsible for structural soundness, essential services and common area maintenance of the property. Reviewing the lease with a qualified Maryland attorney will give you much more insight.
Real Estate
Net Lease
Georgia
Can a tenant terminate a net lease agreement before the end of the term?
I am currently leasing a commercial property under a net lease agreement, where I am responsible for paying rent as well as a share of property expenses such as taxes, insurance, and maintenance costs. However, due to unforeseen circumstances, my business is struggling and I am considering terminating the lease before the agreed-upon term ends. I am unsure if this is legally possible under a net lease and I need clarification on my rights and any potential consequences or penalties involved in terminating the lease early.
Thomas D.
Unless the landlord failed to maintain the property or failed to abide by other terms of the lease, the tenant cannot normally terminate a lease early. I would need to review the lease. Tom
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