Double Net Lease (NN lease) Explained

    In this article, we talk about what are Double Net Leases, otherwise known as a NN lease, and what is the difference between single, double and triple net leases.

    Double Net Lease (NN lease) Explained

    Table of Contents

    1. What is a Double Net Lease?
    2. Where and How are Double Net Leases Used?
    3. Comparisons: Double Net Lease vs Triple Net Lease vs Single Net Lease
    4. Gross Commercial Leases vs Net Commercial Leases

    What is a Double Net Lease?

    A Double Net Lease, otherwise known as a NN lease, is a type of leasing agreement whereby the tenant is required to pay for the property taxes and insurance premiums for the property. These form two of the three main expenses of a property. However, the landlord is still liable for other maintenance expenses associated with the property.

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    Where and How are Double Net Leases Used?

    A Double Net Lease is most commonly used for commercial leases. While not a required part of Double Net Leases, the landlord may offer a lower rental rate because of the additional cost incurred by the tenant in a Double Net Lease.

    As such, the landlord receives the additional property taxes and insurance premiums on top of the monthly rental payments. Despite the fact that in a Double Net Lease, these expenses are the tenant’s responsibility, the payments do go through the landlord for them to be better able to keep track of the payments to the service providers, and take action against any non-payments.

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    Comparisons: Double Net Lease vs Triple Net Lease vs Single Net Lease

    The three major expenses associated with a property are the property taxes, utilities and insurance premiums.

    In a Single Net Lease, the tenant is responsible for only one of the main property expenses - the property taxes. However, such an arrangement is less common than Double Net Leases or Triple Net Leases.

    With Triple Net Leases, the tenant is responsible for all expenses generated by the property, including property taxes, insurance premiums, maintenance fees and utilities, in addition to the base rental charges. A Triple Net Lease may also have the tenant liable for maintenance fees for common areas within the property. While most commonly used in commercial leases, it is sometimes used in rental leases for single-family residential units.

    The following table illustrates the difference among the three types of Net Leases.

    Type of Lease What is Covered When is it Typically Used
    Single Net Lease - Property Taxes Commercial properties but Single Net
    Leases are the least common out of the
    three
    Double Net Lease - Property Taxes
    - Insurance Taxes
    Commercial properties such as:
    - Office buildings
    - Shopping malls
    - Industrial parks
    Triple Net Lease - Property Taxes
    - Insurance Premiums
    - Maintenance Costs
    Longer term leases (10-15 years)
    Larger commercial properties such as:
    - Office buildings
    - Shopping malls
    - Industrial parks
    - Buildings operated by large stable
    businesses

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    Gross Commercial Leases vs Net Commercial Leases

    In any net commercial lease, such as a Double Net Lease, the tenant is responsible for one or more of the property’s relevant expenses.

    However, in a gross commercial lease, it is the landlord’s duty to pay these additional expenses, with the tenant only being responsible for paying rent to the landlord to lease the property. Therefore, this often comes with higher rental rates and limits on use of utilities or services, so as to limit excessive charges to the landlord and pass overflow charges to the tenant in the event of excessive usage of these utilities or services.

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    Disclaimer: The information and/or documents contained in this article does not constitute financial advice and is meant for educational purposes. Please consult your financial advisor, accountant, and/or attorney before proceeding with any financial/real estate investments.