Triple Net Lease (NNN)
A triple net (NNN) lease is a commercial lease in which the tenant pays the three "nets" — property taxes, insurance, and maintenance — on top of base rent. This insulates the landlord's net operating income from operating-expense growth, making income contractual and predictable. For an owner exiting management-intensive apartments, NNN shifts the role from active operator to passive investor; the dominant risk changes from operational risk to tenant credit risk.
Key Points¶
- Tenant pays taxes, insurance, and maintenance; landlord NOI is protected from expense inflation.
- Rent growth typically targets inflation (~1.5–3%/yr), via fixed steps or periodic bumps.
- Preferred tenant categories: medical, dental, fast food, automotive (internet/pandemic/recession resistant).
- Multi-tenant NNN still involves CAM administration and reconciliations (see Co-Tenancy Risk).
- The strongest form is Absolute NNN, where the tenant also covers roof, structure, and parking.