In East Tennessee, what is a commercial triple net lease?

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In East Tennessee, what is a commercial triple net lease?

Asked on June 14, 2009 under Real Estate Law, Tennessee

Answers:

M.D., Member, California and New York Bar / FreeAdvice Contributing Attorney

Answered 12 years ago | Contributor

A triple net lease is one where in addition to base rent, the tenant also pays its share of taxes, insurance and common area maintenance (CAM).

The triple net lease is used extensively in commercial real estate.  It is popular for multi-tenant industrial and retail properties.  With tenants whose expenses vary greatly, such as an industrial user of electricity, the triple net lease is best for the landlord.

Tenants have no control over increases in expenses and budgeting their costs is more difficult.  This is especially true when it comes to repairs and maintenance.  In a triple net lease, for example, the tenants would be responsible for sharing the cost of roof replacement.  This can be a large and many times unexpected expense.

Of course, fixed rent is lower with the triple net lease.  If the building is a newer one, tenants may find triple net to be preferable.  The triple net tenant in a new building can enjoy lower rent and expenses in their first few years.  Once established, they may have grown to the point that larger space is necessary.  The move can be to a different type of lease or another newer facility.


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