Jump to Section
What is a Single Net Lease?
Single net lease (SNN or N lease) is a legitimate, modest and viable option for building wealth in commercial real estate. The "N" in this lease agreement stands for "Net," which symbolizes the property tax that the tenant pays plus other operating costs. In other terms, tenants pay for property taxes and utility costs.
On the other hand, landlords cater for another addendum to lease expenses like insurance, repair, and maintenance costs. For ages, most individuals presumed a single net lease as a risky commercial lease agreement.
Years down the line and with a more informed market audience, things have changed significantly recently. As a result, experts now aggressively champion this lease structure due to its plethora of benefits.
All in all, SNN is an agreement between multitenant building owners and single tenants that makes the latter responsible for insurance, property taxes, maintenance, and common area rent. As a result, landlords perceive SNN as a less perilous investment project because it cuts costs in maintenance charges.
The basic concept behind a single net lease is that tenants only pay a percentage lease to share the building's common expenses. In short, you don't pay for any of the building's fixed costs as they get covered by your property manager, leasing agent, and subtenant. This is a total contrast to a passthrough lease where additional expenses like insurance and repairs shift from landlords to tenants.
Key Terms in a Single Net Lease
Each industry has its share of terms that expedite or simply the running process. The real estate industry is not left behind on this, especially during the assignment of leases. Binding industry terms in a commercial lease include:
Rentable Square Feet
This is a common term used to define shared areas among several tenants in a building lease. It's all about the number of usable square feet in a property, including office space and common areas like hallways, restrooms, recreational, and staircases.
Usable Square Feet
Real estate experts use this office lease metric to describe square footage rented by a tenant. For example, the total space may encompass the storage area, closets, private restrooms, and other spots accessible by tenants.
Lease Term
Lease terms are an essential detail to decide on when making your single net lease agreement. It will influence many factors, like the amount of rent you can charge and how much time you'll have to find a new tenant.
Insurance Types
Since an office space holds a leading position in overall performance, reliable insurance options are critical in minimizing risks. Experts recommend viable policies like leasehold, property & liability, and business interruption.
Agreement Clauses
A practical assignment of lease should include an agreement clause to protect your assets from any potential liabilities that may occur due to the tenant's actions. Three essential clauses commonly found in a lease agreement are rent, term, and use.
Image via Pexels by Leohoho
What Does a Single Net Lease Provide?
A single net lease is a form of a lease agreement that gives you the benefits of both a gross lease and a net lease. However, it is more fixed than a gross lease but less flexible than a net lease.
For some retail and other business owners, it provides a great way to structure ownership, use, and occupancy while improving tax benefits. Without any doubt, this provides a perfect balance of risk and reward.
Advantages of a Single Net Lease
A single net lease can dramatically simplify your business. In addition, it gives you more time for the work that matters, like marketing and sales. Here are other benefits associated with a single net lease .
Increased Cash Flow
Unknown to most people, a single net lease enables organizations and businesses to lower operational costs. In this legal agreement, tenants pay all applicable taxes, insurance, and maintenance for the rented space. This plan helps increase cash flow for the landlord and other investors in the long run.
Reduced Real Estate Tax Exposure
Landlords have a legal obligation to collect and pay real estate taxes on commercial properties. This approach has particular implications on how the landlord files his tax return and on certain taxpayers like Real Estate Investment Trusts (REITs). A single net lease can be a great way to lower taxable income for a landlord in such circumstances.
Flexibility
Nothing beats the flexibility associated with a single net lease. However, you can enhance the prowess of this lease agreement by including a Landlord's Deduction clause in the agreement. It allows a landlord to receive reimbursement for any costs incurred during or after the tenancy term. Moreover, it gives a tenant accounting transparency and financial liability protection.
Disadvantages of a Single Net Lease
While a single net lease does offer considerable cost savings to the owner and lessee, it also has some drawbacks in certain circumstances.
Time-consuming
Although SNN eliminates the process of sending leases, taking photos, and getting sign-offs from tenants, there is more to that. Keep in mind that single net leases require detailed planning for impressive results. Landlords and tenants in a hurry may opt for other alternatives like double or triple leases.
Costly
Taking on a single net lease might seem like you're getting the best of both worlds. Nonetheless, they can be more expensive in the long run than a regular lease. The reason is that with a single net lease, you end up paying for repairs and expenses that landlords would typically cover with a gross or triple net lease.
Challenge Calculating Monthly Profit
Due to irregular costs of building maintenance fees and insurance premiums, estimating monthly profits can be a huddle for most landlords. Still, this type of lease works perfectly for those with plenty of time and who are not concerned about regular ROI.
Single Net Lease vs. Gross Lease
In a gross lease, landlords cover approximated costs like utilities, insurance, repairs, and taxes. At the same time, the tenant forfeits a fixed percentage of rent. This is different from a modified gross lease, where a landlord and a tenant share responsibilities in paying for operating costs equally.
Tenants on a single net lease have the upper hand in such a scenario because the landlord pays for a considerable percentage of building expenses.
Single Net Lease vs. Double Net Lease
When signing a double net lease agreement (net-net or NN), tenants consent to cater for a couple of property expenses like insurance premiums, utilities, and taxes. This is contrary to a single net lease where a tenant pays for property taxes plus rent.
Single Net Lease vs. Triple Net Lease (NNN)
A triple Net Lease, also referred to as NNN or net-net-net, requires tenants to pay for repairs, maintenance, insurance, taxes, and rent. In the lease agreement, the landlord is in charge of most financial responsibilities affiliated with the property. Mainly, the landlord remains responsible for maintenance and insurance costs, unlike triple and double lease agreements.
Bottom Line
It is the dream of every commercial real estate investor to benefit from a significant ROI. Unfortunately, most property owners run from a single net lease because of its complexity, particularly when leasing office structures. Astute business owners can realize substantial savings and avoid several risks. It is vital to weigh through pros and cons before consenting to this type of lease structure.
Post a project in ContractsCounsel’s marketplace to get flat fee quotes from real estate lawyers for your project. All lawyers in our marketplace are vetted by our team and peer-reviewed by our customers for you to explore before hiring.
Meet some of our Single Net Lease Lawyers
Thomas G.
https://www.tgravelylaw.com/
Valerie L.
Current practice includes: employment law, family law, business law and personal injury.
Elbert T.
Elbert Thomas is the founder of the Thomas Law Group, LLC. Elbert is proficient in contract creation, drafting, reviewing, and negotiating various business contracts and demand letters in industries such as construction, personal, professional services, non-profits, and real estate. Elbert typically represents small and large companies in drafting and negotiating countless agreements such as purchase sale agreements, interconnection agreements, lease agreements, demand letters, cease & desist letters, transfer of deeds in real property, and merger/acquisition agreements. In addition, Elbert is also experienced in start-ups, small business formation, drafting operating agreements, and estate planning.
July 17, 2023
Tanu C.
Ms. Tanu Chaturvedi Esq. brings vast experience: experience as Corporate Counsel at a multi-million dollar international corporation, experience as a legal & business leader in the legal department at the world's leading mission capability integrator in the nation's capital that has been named a Top 100 Employer Forbes by state & Top 25 Defense Contractor in the world & named Top 7 in the Washington Technology Top 100 2022 & one of the largest defense contractors in the marketplace & has also been named as Top Managed Company by The Wallstreet Journal & included in the Inc. 500, experience as the sole Attorney at a national company that was recognized in 2017 as a top employer in the capital by "The Washington Post" & has also been listed on the Inc. 5000 more than once as one of the fastest growing companies in the nation, & in 2019, & named as a Finalist for the DC Moxie award: for businesses that demonstrate significant boldness & innovation in business strategy, experience working at one of the world's largest insurance brokerage firms, one of the largest law firms in the capital, a boutique start-up that specializes in investigations, security, & risk, the world’s largest professional service firm (largest of the “big 4” companies) in conjunction with the nation’s executive law enforcement agency, experience working at a corporation with global reach that was lead by a former cabinet member of the Clinton administration, experience working at a Fortune 500 in one of the world's largest insurance markets, at an internationally recognized boutique law firm, experience as the only female legal professional in the felony division of a criminal department in the nation's most dangerous jurisdiction as an undergrad, & experience working in the offices of public officials. She is also a graduate from two different internationally recognized institutions that have a record of turning out graduates with the skill to lead in their industries & distinguished law school graduate from an ABA accredited law school that received recognition for academic & leadership achievement. She is an invited contributor to legal blogs, and she enjoys advocating for increased literacy. Notably, she also supports advocacy for the performing arts as a former graduate of a magnet school for the performing arts. Please don’t hesitate to reach out to her with any questions, and she looks forward to hearing from your team.
July 18, 2023
Dilini L.
I am an attorney licensed in California with particular experience in local policy work, workplace justice, and environmental law. I have authored or co-authored over 30 amicus briefs (including one for which I received an Amicus Service Award from the International Municipal Lawyers Association), have extensive experience researching state law across the country and across issue areas, and pride myself in clearly and concisely distilling complex and/or technical legal concepts for lawyers and non-lawyers alike.
July 19, 2023
Courtney A.
Hello! I am a transactional attorney enthusiastic about helping entrepreneurs launch and protect their businesses. Let me know how I can support you with drafting and negotiating contracts, setting up your LLC, copyrighting creative content, or trademarking your brand. I am experienced with drafting and negotiating business contracts, including service/vendor agreements, NDAs, marketing agreements, licensing agreements, terms & conditions, terms of use, and many more! I have helped companies develop strong template agreements and strategies for contract management. My goal is to deliver a simple, stress-free client experience!
July 19, 2023
Rudy C.
As a multilingual attorney, Rudy Cohen-Zardi holds multiple degrees from several institutions worldwide. He has gained experience in leading firms, including Eversheds Sutherland, LLP and Bank of China (NY). He is licensed to practice in New York. His practice focuses on bankruptcy, corporate, and contracts law.
Find the best lawyer for your project
Browse Lawyers NowReal Estate lawyers by top cities
- Austin Real Estate Lawyers
- Boston Real Estate Lawyers
- Chicago Real Estate Lawyers
- Dallas Real Estate Lawyers
- Denver Real Estate Lawyers
- Houston Real Estate Lawyers
- Los Angeles Real Estate Lawyers
- New York Real Estate Lawyers
- Phoenix Real Estate Lawyers
- San Diego Real Estate Lawyers
- Tampa Real Estate Lawyers
Single Net Lease lawyers by city
- Austin Single Net Lease Lawyers
- Boston Single Net Lease Lawyers
- Chicago Single Net Lease Lawyers
- Dallas Single Net Lease Lawyers
- Denver Single Net Lease Lawyers
- Houston Single Net Lease Lawyers
- Los Angeles Single Net Lease Lawyers
- New York Single Net Lease Lawyers
- Phoenix Single Net Lease Lawyers
- San Diego Single Net Lease Lawyers
- Tampa Single Net Lease Lawyers
ContractsCounsel User
Review commercial lease agreement
Location: Florida
Turnaround: Over a week
Service: Contract Review
Doc Type: Commercial Lease
Page Count: 65
Number of Bids: 5
Bid Range: $450 - $1,000
ContractsCounsel User
Office Lease Review
Location: California
Turnaround: Over a week
Service: Contract Review
Doc Type: Commercial Lease
Page Count: 55
Number of Bids: 8
Bid Range: $650 - $3,000
related contracts
- Addendum to Lease
- ALTA Statement
- Apartment Lease
- Apartment Rental Agreement
- Assignment of Lease
- Boundary Line Agreement
- Brokerage Agreement
- Building Contract
- Building Lease
- Business Office Lease Agreement
other helpful articles
- How much does it cost to draft a contract?
- Do Contract Lawyers Use Templates?
- How do Contract Lawyers charge?
- Business Contract Lawyers: How Can They Help?
- What to look for when hiring a lawyer