Triple Net Lease Attorneys

For commercial real estate investors looking to reduce the hands-on burden of property management, net-leased properties offer a compelling investment opportunity. A net lease is a lease agreement between a landlord and a tenant where the tenant pays rent plus additional costs related to the maintenance, operation, and ownership of the property, including property taxes, insurance, utilities, maintenance and repair costs, and other operational expenses.

Types of Net Leases

Net leases are categorized based on the different sets of costs that the tenant pays:

Single Net Lease (N)

In a single net lease, the tenant pays property taxes in addition to base rent. The landlord remains responsible for all other operating and maintenance costs.

Double Net Lease (NN)

With a double net lease, the tenant covers property taxes, insurance, utilities, and the maintenance of other parts of the property, in addition to rent. The landlord is responsible for structural elements, including the roof and foundation.

Triple Net Lease (NNN)

Triple net leases place nearly all operating responsibilities on the tenant, including real estate taxes, insurance, utilities, and maintenance. The landlord may retain some responsibility for environmental and other legal obligations that predate the start of the lease. From a landlord’s perspective, this lease type offers maximum simplicity and minimal oversight. 

Why NNN Leases?

Triple net leases are the gold standard for simplicity from an owner’s perspective. They are commonly used in single-tenant commercial buildings and often include:

• Initial lease terms of 10+ years
• Built-in rent increases
• Multiple renewal options

By transferring operational duties to the tenant, landlords avoid unexpected expenses and day-to-day management, while tenants benefit from lower rent. 

Before investing in a NNN-leased property, it’s important to assess more than just the financial lease terms, including the property’s location, applicable zoning laws and restrictions, associated tax implications, historical location profitability and stability of the property, strength of lease guarantor, and market viability for tenant’s products or services. To further mitigate risk, landlords are advised to obtain their own insurance policies for added protection.

Sale Lease-back

A sale-leaseback allows a property owner to sell the asset and then lease it back under an NNN lease. This arrangement provides capital for the seller while maintaining operational continuity at the same location.

Common Property Types for Net Leases

While any type of commercial property can utilize a net lease, whether it is single-tenant net-leased property or a multi-tenant net-leased property, they are particularly prevalent in:

• Free-standing retail, QSRs, pharmacies or other service buildings/businesses
• Office complexes
• Shopping malls/centers
• Industrial parks

Investors are typically drawn to well-established regional and national brands, as these tenants often offer corporate guarantees and demonstrate a strong commitment to long-term lease agreements. Likewise, experienced franchisees with extensive property portfolios provide investors with a proven track record of reliability for stable, long-term investment opportunities.

Advantages of Net-Leased Properties

Compared to gross leases, net leases offer numerous benefits for landlords and investors alike:

• Predictability and Stability: Landlords are shielded from the unpredictability of costs associated with property taxes, insurance, and property maintenance, reducing financial uncertainty and making it easier to budget and plan for the future.
• Minimal Management Demands: Tenants assume the burden of management, allowing landlords a more hands-off approach.
• Long-Term Security: Extended lease terms and scheduled rent increases minimizes frequent lease renewals and rental rate negotiations, saving landlords valuable time and money in the management of their real estate investments.

While net leases minimize active involvement and offer substantial benefits, it’s important to note that they are not entirely free of management responsibilities. Landlords must still monitor issues that may arise, tenant compliance, and periodically inspect the property—particularly near lease expiration.

When to Consider a Net Lease

Net leases are ideal for:

• Investors seeking passive income with fewer management headaches
• Out-of-state or absentee landlords (as the need for physical proximity and constant oversight over day-to-day operations, such as maintenance and repair, is greatly reduced and sometimes even entirely removed)
• Estate planning, especially when using LLC structures to distribute rental income among beneficiaries, offering a streamlined approach to intergenerational wealth transfer
• Buyers interested in secure, long-term real estate assets

A net lease may also be necessary to attract selective investors who favor properties with NNN tenancies due to the inherent advantages they offer. 

How a Commercial Real Estate Attorney Can Help

Despite their simplicity, net leases still require thorough legal oversight. A commercial real estate attorney ensures clear delineation of responsibilities in the lease, sound title-holding strategies, and compliance with state-specific laws and zoning regulations. This is especially critical when venturing into unfamiliar state territory, where the expertise of a commercial real estate attorney is invaluable in guiding you through local laws and regulations.

Work with Our Triple Net Lease Attorneys

At FRB, our real estate attorneys bring extensive experience in NNN lease transactions. We perform in-depth lease reviews and due diligence, and we maintain a national network of local counsel to ensure a seamless experience across state lines.

When you partner with us for your net-leased property transaction, you gain a team dedicated to safeguarding your investment and maximizing its long-term value. Contact our team today to help guide you through the complexities of your net lease agreements.