If you have been looking to lease a commercial property, or are considering investing in a property to lease out, you may have come across the words “net lease” You may have seen it mentioned in various forms, such as triple net, double net and single net leases.
Understanding what is the difference between these terms will be crucial before advancing further.
It’s about what extras the tenant must pay
The three different classifications of net leases differ in what the landlord includes and what the tenant is left to pay. All of them start with a base rate that the tenant must pay:
- Triple net lease: The tenant must pay three things on top of the base rent. They will pay property tax, insurance and maintenance.
- Double net lease: Slightly more is included, as the landlord covers any maintenance costs, while the tenant still picks up the bill for insurance and property taxes.
- Single net lease: Aside from a fully inclusive price, this is the most comprehensive package for a tenant. The only extra they will pay on top of the base rent is the property tax, as the landlord covers maintenance and insurance.
These extras can sometimes vary from one month to the next, so a more comprehensive lease gives a tenant more security, but that lack of security could be in their favor if the extras turn out to be lower than expected.
Determining the terms of a lease involves far more than just agreeing on a price, so be sure to seek legal guidance before putting pen to paper.
