💼 Triple Net Lease Explained: What Every CRE Investor Should Include 🏢
💼 Triple Net Lease Explained: What Every CRE Investor Should Include 🏢
🏠NNN Lease Checklist: Protect Your Cash Flow Like a Pro! 💰
đź’Ľ What to Include in a Triple Net Lease: A Guide for Smart CRE Investors
In commercial real estate, Triple Net Leases (NNN) are a favorite among investors because they create predictable income and reduce landlord headaches. But not every NNN lease is created equal — the details make all the difference in protecting your cash flow and long-term returns.
Here’s what you need to know about what to include in your next triple net lease.
🧾 1. Define the Three Nets Clearly
A true Triple Net Lease requires tenants to pay for:
·Property Taxes
·Insurance
·Maintenance (CAM)
Make sure each cost category is clearly itemized in the lease. Specify who handles what — for example, HVAC repairs, roof maintenance, and parking lot upkeep. The clearer the language, the fewer disputes later.
🏗️ 2. Capital vs. Operating Expenses
Ambiguity here can be costly. The lease should define which expenses are capital improvements (owner’s responsibility) vs. operating expenses (tenant’s responsibility).
➡️ Example: Replacing a roof is capital. Fixing a leak is maintenance.
đź’° 3. Rent Escalations
Include an annual rent escalation clause — usually 2–3% per year or tied to CPI (Consumer Price Index). This ensures your income keeps pace with inflation and rising property costs.
📆 4. Term & Renewal Options
Triple net leases often run 5–20 years, so renewal options are crucial. Include terms that favor both stability and flexibility:
·Predefined renewal rents
·Notice period requirements
·Early termination penalties
🧱 5. Tenant Responsibility Clauses
Even if a tenant covers all “nets,” ensure the lease specifies who:
·Maintains HVAC and plumbing
·Covers pest control and landscaping
·Handles snow removal or parking lot lighting (if applicable)
This section reduces grey areas and potential legal disputes.
⚖️ 6. Indemnification & Liability
Always include indemnification clauses protecting the landlord from liability due to the tenant’s negligence or activities on-site. It’s your safeguard against lawsuits and accidents.
đź“ś 7. Insurance Requirements
The lease should require tenants to maintain:
·General liability insurance
·Property insurance naming the landlord as an additional insured
·Proof of coverage annually
This protects your investment and aligns with lender requirements.
🕰️ 8. Default Remedies
In the event of non-payment or lease violations, your lease should spell out:
·Late payment fees
·Cure periods
·Landlord’s right to re-enter or terminate
Strong default language keeps your property performing and your rights protected.
🏦 9. Estoppel Certificates & Subordination
Include a clause requiring tenants to sign estoppel certificates when requested. Lenders and buyers rely on these to verify lease terms and cash flow accuracy.
🧠Final Thoughts
A well-written Triple Net Lease does more than collect rent — it builds long-term value. When structured correctly, it shifts risk away from the landlord while preserving asset quality.
Whether you’re buying, selling, or leasing a NNN property, work with a commercial real estate advisor who understands how to balance income, expenses, and risk exposure.
At Viking Enterprise Team | eXp Commercial, we help investors structure leases that perform like well-oiled machines — predictable, protected, and profitable.
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© 2023-2024 Bill Rapp, Broker Associate, eXp Commercial Viking Enterprise Team
