Tag Archives: Leases

Commercial Property Lease Terminology

ComlLeaseTerminologyThere are numerous forms of leases. The most common of these is the Triple Net lease. In a Triple Net lease, the tenant is responsible for their proportionate share of property taxes, property insurance, common operating expenses and common area utilities. Tenants are further responsible for all costs associated with their own occupancy including personal property taxes, janitorial services and all utility costs.

If the space is part of a larger building, the common area maintenance charges (CAMS) will be divided among the tenants of the building, generally based upon the tenant’s square footage percentage of the overall complex. In general, the landlord will be responsible for the structural integrity of a building.

NET LEASES

As with modified gross leases there are numerous forms of net leases. The most common of these is the Triple Net lease. In a Triple Net lease, the tenant is responsible for their proportionate share of property taxes, property insurance, common operating expenses and common area utilities. Tenants are further responsible for all costs associated with their own occupancy including personal property taxes, janitorial services and all utility costs.
This type of lease is rarely utilized in a multi-tenant office building. As with a modified gross lease, a modified net lease is also available. There are no set standards as to what costs may be excluded in a modified net lease; the lease is usually customized according to need.

Types of Net Leases
Net leases define the responsibilities of the landlord and the tenant differently.  The following are types of net leases:

  1. Single Net Lease – A single net lease is a net lease where the tenant agrees to pay a monthly lump sum base rent as well as the property taxes.  The landlord is responsible for all other operating expenses of the premises.

  2. Double Net Lease (NN) – A double net lease is a net lease where the tenant agrees to pay a monthly lump sum base rent as well as the property taxes and the property insurance.  The landlord is responsible for all other operating expenses of the premises.

  3. Triple Net Lease (NNN) – A Triple net lease is a net lease where the tenant agrees to pay a monthly lump sum base rent as well as the property taxes, the property insurance, and the maintenance.  Under a triple net lease there are a few legal defenses which may relieve a tenant of his responsibilities.  For example, a triple net lease may relieve the tenant of his responsibility if the property is subject to an eminent domain proceeding.

  4. Absolute Triple Net Lease (Bond Lease) – An absolute triple net lease is a net lease where the tenant agrees to pay a monthly lump sum base rent as well as the property taxes, the property insurance, and the maintenance.  Under an absolute triple net lease there are no legal defenses if a tenant fails to meet his responsibilities.

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