Net leases usually apply to commercial real estate tenants or lessees. In this type of arrangement, the renter agrees to pay not only the rental cost but also the maintenance, property taxes, repairs, insurance and other expenses pertaining to the space or unit being leased. In a residential type of lease, the landlord or owner of the property usually pays for the incidental costs mentioned above. There are many types of net leases applicable to commercial real estate tenants, but the ones below are the most common.

1. Single Net Lease

The single net lease, more commonly known as the net or N lease, is the simplest type. Under this agreement, the renter will pay not only the rent but also the property tax of the space or property being rented. However, this type of commercial real estate lease contract is not very popular. Commercial property owners are more inclined to pass to their renters not just the property tax but other incidental expenses as well.

2. Double Net Leases

The double net (NN), or net-net, lease is popular among all types of net leases for commercial real estate. In this type of agreement, the renter will pay for building insurance and property taxes on top of the rent. However, under such a contract, the landlord may shoulder maintenance expenses. Apart from this, the owner of the property may also consent to pay for structural repairs when needed.

3. NNN or Triple N Lease

Of all the types of net leases, the triple N is most preferred by landlords. Under this lease contract, the renter of the commercial space will pay for the majority of the incidental expenses on top of the monthly rent. This means that the renter is responsible for the real property tax, building insurance, maintenance and normal repairs related to the commercial space. All expenses required to ensure the full functionality of the property being leased will be shouldered by the lessee. If you are planning to rent a unit or space in a fully commercialized building, you must prepare yourself for this type of agreement.

4. Bondable Net Lease

The bondable net lease, also known as the “hell or high water” lease or the absolute triple net lease, is the most extreme of type of net lease. In this type of agreement, the renter basically agrees to pay for all costs or expenses of the building apart from the rent. This means that the renter must be prepared to shell out money even for unforeseen expenses, which include repair costs for damages brought about by accidents, vandalism or even terrorism. If you ever come across this type of lease, you need to read the contract very carefully because the guidelines under this lease are usually very strict. In fact, there are some bondable net leases that prohibit the tenant from pre-terminating the contract.

In the end, if you are planning to rent a commercial space, it is important that you know the terms of the net leases that you are considering. Before you agree to the lease contract, make sure that the provisions of the lease are acceptable to you because once you sign the agreement, you will be bound by the contract terms.

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