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What is a triple-net lease?

On Behalf of | Nov 14, 2023 | Real Estate Law |

When signing a commercial lease, there are a few different ways for the lease to be set up. Both the person who is drafting it and the one who is signing need to be well aware of their obligations. In part, these are defined by whether or not it is a triple-net lease.

A standard lease covers the rent. In some cases, this is all that is owed. But a triple-net lease adds additional expenses. For example, the tenant may have to pay for the building insurance, the real estate taxes and the costs of maintenance and utilities. But with a standard lease, the property owner would still have to pay for things like insurance or upkeep. This is why it’s so important to know what type of lease it is and what financial obligations there are.

Why are commercial leases different?

Many residential leases are set up with just a monthly rent payment. Some of them are designed to include the cost of utilities. But things like insurance and upkeep are generally the responsibility of the property owner.

Commercial leases are different, though, because they often tend to be long-term and because the tenant may make significant alterations to the property. They’re not just renting out the storefront as is. They may do decorating, remodeling and much more. They could install new shelving, lighting and flooring.

A commercial tenant is also using the space in a very intense fashion. They get to decide when the business is open, for instance, which impacts what the utility costs are going to look like. A triple-net lease may be used so that this tenant has complete freedom to use the space as they want, but they also do have to cover the costs of that use.

Signing a lease may be a bit more complicated in a commercial setting. It’s important for those involved to understand their legal options.