In a triple net lease, the tenant is responsible for base rent plus ongoing property expenses—property taxes, insurance, and maintenance. This arrangement generally leaves the landlord with limited operating-cost obligations, though structural repairs or capital expenditures may still be addressed by the lease terms.
NNN leases are common for single-tenant properties such as freestanding retail, restaurants, medical offices, or banks, and are often paired with long terms. The tenant gains cost transparency and control over property upkeep, while the landlord benefits from reduced operating exposure and more predictable cash flows when tenants remain in place.
From an investment perspective, NNN leases can simplify cash flow modeling because operating expenses are largely passed through. Rent components may be lower than gross leases to reflect the pass-through, but total occupancy cost depends on taxes, insurance, and maintenance levels and on CAM charges. The primary risks shift toward the tenant’s credit quality and lease continuity: vacancy, rent resets, or tenant default can affect the property’s NOI and, therefore, the cap rate used in valuation.
Lease documents may define which items are included in pass-throughs, how CAM charges are calculated, and whether capital expenditures are recoverable from the tenant.
A property owner signs a 12-year NNN lease with a national retailer; the tenant pays base rent plus property taxes, insurance, and CAM charges, while the landlord’s obligation is limited to financing and capital improvements.
Net lease · Gross lease · Modified gross lease · Net operating income (NOI) · Capitalization rate (cap rate) · Common area maintenance (CAM)