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What is a triple-net lease?

On Behalf of | Jan 20, 2023 | Real Estate Transactions |

If you’re a commercial landlord, it’s important to structure your leases properly. It’s also important for all of the details to be clear to both parties so that there are no disputes. If a dispute does arise, then you’ll need to look into your legal options to resolve it.

To help you avoid these disputes, it’s best simply to define all of the terms in the lease and make sure that it is very clear about the financial obligations from both sides. This is where something like a triple-net lease may come into the picture, although you will see that it is not the only option.

Covering all costs

A triple-net lease essentially means that the person who is renting the space is going to pay almost all of the costs that come along with it. They will have to pay the rent, of course, but then they will also have to cover the real estate taxes, the cost of utilities, the cost of maintenance and any necessary building insurance.

As you can see, all of these costs combined could be far more than the base rent. That’s why disputes will sometimes arise when one person believes they have signed a triple-net lease and the other believes they have signed a simpler lease that just requires them to pay rent every month. Any disparity in price is going to be problematic.

Other options

Of course, you don’t have to use a triple-net lease. You could also use a single-net lease, which covers both property taxes and the rent. Another option may be to use a double-net lease, in which the rent is paid along with property insurance and property taxes. You also simply have the option of charging rent and covering all these other costs yourself. It just depends on the specifics of the situation and how you want to set things up.

When it is so important to get all the details right, it’s absolutely crucial that you know what legal steps to take.