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An NNN commercial lease, or triple net lease, is a kind of lease contract where the lessee is accountable for settling all expenditures for the rented property. This includes insurance, property taxes, and maintenance. This blog post will cover the fundamentals of NNN commercial leases and why they are becoming prevalent among tenants and commercial property owners.
Key Aspects of NNN Commercial Lease
A NNN commercial lease refers to a lease contract where the lessee is accountable for settling all expenditures associated with the property. It indicates that the owner is not liable for any of these expenditures, and the renter is solely answerable. In addition, the phrase “NNN” stands for “triple net”, which are the three expenditures the lessee is accountable for settling. Some of the key aspects of an NNN commercial lease:
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Lessor Accountability
The lessor is generally accountable for the structural elements of the rental facility. The lessor may be accountable for some upkeep, as agreed upon in the NNN lease.
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Lessee Accountability
The lessee has complete authority over the rental property during the lease duration. Tenants are accountable for settling insurance, property taxes, and maintenance expenses in addition to rent.
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Length of NNN Lease
Triple net or NNN leases are generally more extended than conventional leases, varying from 10-25 years
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Property Usage
Usage of the rental property is limited to the specific use summarized in the lease contract
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Rental Structure
Rent in NNN commercial lease is generally higher than in a conventional lease to compensate for the extra obligations of the lessee.
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Renewal Alternatives
Renewal choices may be incorporated in the lease contract, allowing the lessee to rent the property after the primary lease term has been completed.
What Makes NNN Commercial Lease So Popular?
NNN commercial leases are becoming exceptionally prevalent for numerous reasons. Initially, they deliver stability for the lessor, as they understand that the lessees will take care of and settle the expenditures associated with the commercial rental property. It lets the landlord concentrate on other facets of their business and lowers their accountabilities concerning the rental property.
Secondly, NNN or triple net commercial leases can deliver a higher level of authority for the lessee, as they can regulate and handle the expenditures associated with the commercial property. It can lead to cost savings for the lessee, as they can negotiate more profitable property taxes and insurance rates. Besides, the renter can make any required modifications or improvements to the property, enhancing its worth and attracting more clients.
Ultimately, NNN commercial leases deliver more adaptability for the lessor and the lessee. The property owner is not accountable for any expenditures associated with the commercial property, which implies they are free to invest their resources and time into other business areas. The tenant is also free to make any necessary improvements or upgrades to the property, which can improve its value and attract more customers.
NNN Or Triple Net Commercial Lease Tips
You must evaluate several factors when negotiating a NNN or Triple net commercial lease. Primarily, it is necessary to thoughtfully examine the commercial lease contract and comprehend all the obligations and responsibilities associated with the rental property. The NNN commercial property lease should determine the expenditures the lessee is accountable for and the amount they must pay.
Furthermore, it is also vital to comprehend the regional real estate domain, as this can influence the expense of insurance and property taxes. The lessee should analyze and comprehend the average cost of these expenditures, as this can assist them in negotiating a more favorable commercial lease contract.
Ultimately, the lessee should assess their long-term objectives and decide whether a NNN commercial lease is the most suitable option. For instance, if the lessee plans to make significant modifications to the property, they may want to negotiate a commercial lease contract that provides them more authority over the expenditures associated with the rental property.
Triple Net Lease Provisions
Commercial real estate investors prefer net leases since they absolve lessors of some of the threats and expenditures of property ownership. Moreover, landlords obtain the least risk in a triple-net or NNN commercial lease since their lessees are accountable for maintenance, insurance, and taxes.
Nevertheless, most NNN or triple net commercial leases are slightly more complicated than this simple contract. A typical triple-net or NNN lease can comprise many distinct provisions and stipulations. Below are a few common clauses of the NNN commercial lease.
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Lease Term
Some NNN commercial leases comprise a termination provision that defines the duration in which the lease is functional. This provision allows lessees to assess the viability of the commercial area relative to their expected development.
It also safeguards investors from lessees who don't keep the property as agreeably as expected. A renewal clause can let lessees continue the commercial lease after the existing term lapses. And the most prevalent NNN commercial lease terms vary between 10 and 15 years.
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Rent Clause
Rent should always remain part of any leasing contract, but a rent provision can help change this prerequisite. For example, a rent clause can comprise automatic rent changes (e.g., a rent decrease/increase after one year).
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Property Use Provision
A property use clause specifies parameters for the lessee's use of the commercial area. In some circumstances, this may be impacted by zoning limitations in your area, though owners can stipulate the type of enterprise activities for which the establishment may be used.
NNN Commercial Leases and Financing
As in any commercial leasing arrangement, credit matters, but owners must ensure that lessees can handle the property's financial obligations for triple net leases. Generally, you'll want to rent the property to "credit lessees," which refers to those with a healthy credit record and a high possibility of making routine, timely payments.
In addition, these credit ratings indicate the tenant's capability to fulfill their financial responsibilities. Checking the credit rating is essential because leasing to non-credit lessees carries an improved risk that you won't get rent payments on time or the lessee will not maintain the commercial property as decided.
Key Terms
- Rent: The sum of money settled by the lessee to the owner for the use of a rental property.
- Security Deposit: A sum of money offered by the lessee to the owner at the beginning of a lease as a form of safety.
- Term: The duration for which a lease contract is in effect.
- Default: A condition in which the lessor or the lessee fails to meet their responsibilities under the lease contract.
- Renewal: The procedure of expanding the duration of a lease contract after it has expired.
Conclusion
Overall, NNN commercial leases are becoming prevalent among commercial property landlords and lessees, as they deliver authority for the lessee, stability for the owner, and flexibility for both parties. Moreover, when negotiating a NNN or triple net commercial lease, it is necessary to carefully review the lease agreement and hire our expert attorneys at ContractsCounsel to understand the regional real estate market and consider one's long-term objectives. Regarding these considerations, a NNN commercial lease agreement can be a useful alternative for tenants and lessors.
Meet some of our NNN Commercial Lease Lawyers
Daehoon P.
Advised startups and established corporations on a wide range of commercial and corporate matters, including VC funding, technology law, and M&A. Commercial and Corporate Matters • Advised companies on commercial and corporate matters and drafted corporate documents and commercial agreements—including but not limited to —Convertible Note, SAFE, Promissory Note, Terms and Conditions, SaaS Agreement, Employment Agreement, Contractor Agreement, Joint Venture Agreement, Stock Purchase Agreement, Asset Purchase Agreement, Shareholders Agreement, Partnership Agreement, Franchise Agreement, License Agreement, and Financing Agreement. • Drafted and revised internal regulations of joint venture companies (board of directors, employment, office organization, discretional duty, internal control, accounting, fund management, etc.) • Advised JVs on corporate structuring and other legal matters • Advised startups on VC funding Employment Matters • Drafted a wide range of employment agreements, including dental associate agreements, physician employment agreements, startup employment agreements, and executive employment agreements. • Advised clients on complex employment law matters and drafted employment agreements, dispute settlement agreements, and severance agreements. General Counsel • As outside general counsel, I advised startups on ICOs, securities law, business licenses, regulatory compliance, and other commercial and corporate matters. • Drafted or analyzed coin or token sale agreements for global ICOs. • Assisted clients with corporate formations, including filing incorporation documents and foreign corporation registrations, drafting operating and partnership agreements, and creating articles of incorporation and bylaws. Dispute Resolution • Conducted legal research, and document review, and drafted pleadings, motions, and other trial documents. • Advised the client on strategic approaches to discovery proceedings and settlement negotiation. • Advised clients on employment dispute settlements.
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.
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.
Paul M.
Transactional attorney and corporate in house counsel for 15 years. Draft all types of contracts and employment agreements.
October 20, 2023
Corey H.
Veritas Global Law, PLLC ("Veritas") is a law firm specializing in Life Sciences, Private Equity, M&A, technology transactions and general corporate law. Veritas frequently represents clients seeking cost a cost efficient, on-demand, general counsel in a variety of general corporate law matters, and a range of contracts including NDAs, MSAs, Software as a Service (Saas) agreements. Veritas also represents U.S. and non-U.S. private investment fund GPs and LPs across a broad range of activities with a particular emphasis on private equity, venture capital, secondary funds, distressed funds and funds of funds. Mr. Harris received his LL.M. from the University of California, Berkeley, Boalt Hall School of Law and served as an articles editor of the Berkeley Business Law Journal and was an active member of the Berkeley Center for Law Business and the Economy. Additionally, Mr. Harris also holds a J.D. from Boston College Law School, a M.B.A. from the Boston College Carroll School of Management, a B.A. from Hampton University in Political Science with a minor in Economics and Spanish and a certificate in financial valuation from the University of Oxford, Saïd Business School.
October 24, 2023
Samantha P.
Samantha earned her J.D. at the University of Hawaii, William S. Richardson School of Law and has been a member of the Hawaii State Bar Association since 2020. Samantha has worked as a Family Law attorney in Hawaii since 2020, and has represented clients on a variety of family law matters including: premarital agreements, pre- and post-judgement custody, parenting time and child support issues, pre- and post-divorce issues, interstate custody, and paternity issues. Samantha is a certified E-RYT 200 yoga instructor, taught yoga classes at the Modern Hotel in Waikiki throughout law school, and continues to teach yoga classes at various yoga studios in Honolulu to this day.
October 30, 2023
James S.
https://www.linkedin.com/in/james-swindle/
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ContractsCounsel User
Master Lease Retail
Location: Texas
Turnaround: A week
Service: Drafting
Doc Type: Triple Net Lease
Number of Bids: 2
Bid Range: $1,500 - $2,000
ContractsCounsel User
Draft NNN Agreement for Manufacturer
Location: California
Turnaround: Less than a week
Service: Drafting
Doc Type: Triple Net Lease
Number of Bids: 6
Bid Range: $675 - $1,495
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