August 17, 2007
In a commercial leasing, rents are often quoted as being NNN or Triple Net. What this means is that in addition to the quoted rental rate, the tenant, under the lease, is responsible for their share of the operating expenses and real estate taxes associated with the property, in addition to the tenant’s own janitorial and utilities.
NNN refers to Maintenance, Insurance, and Taxes. Maintenance generally covers the maintenance of the property, including landscaping, common area utilities, and property management. It is important tenant’s understand the operating expense clause in their lease to know exactly what costs the landlord is capable of passing-through. Insurance refers to property insurance (this is seperate from tenant’s general liability insurance), and Taxes refers to tenant’s proportionate share of the property taxes.
Because different landlord’s might include or exclude certain expenses from their definition of NNN, it is important to ask the question so as to be able to accurately predict operating expenses. It is also important to ask for historical operating expenses to understand if there has been any deferred maintenance or abnormal expenses associated with the property that could impact the expenses going forward.
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