In real estate, every property and every transaction are unique. It’s important to become familiar with the various kinds of commercial and industrial leases to best serve your specific interests. Keep reading for a basic overview on industrial triple net leases.
What Is A Triple Net Lease?
Generally, a net lease is a common agreement entered into by commercial and industrial landlords and tenants where the tenant bears the cost for some or all of the expenses that are traditionally covered by a landlord. These expenses are paid in addition to a calculated base rent and may include the cost of real estate taxes, operating expenses, utilities, and insurance. A triple net lease, or a “net-net-net” lease, is usually used when a single tenant leases an entire industrial property and agrees to cover all of the additional expenses mentioned above. Tenants will typically pay these expenses monthly based on a landlord’s estimate of yearly costs.
Why Should a Landlord Consider a Triple Net Lease?
Industrial triple net leases are fairly common and generally favor landlords as they manage risk and ensure a property’s profitability. Triple net leases reduce the effects of inflation by shifting any increase in property tax, insurance premiums, and operating expenses onto the tenant. This allows industrial landlords to manage their expectations for a fixed net return and reduce the risks associated with potential expense increases. These arrangements can also relieve the landlord from its duty to maintain and repair the premises and are great for someone looking to make a more hands-off investment in real estate.
Are there Benefits for Tenants in a Triple Net Lease?
A triple net lease can be the right option for a very specific kind of tenant. This lease will best serve a large sophisticated industrial tenant who knows the business and is looking to lease either a large portion or the entirety of a property. These tenants will have more bargaining power and may be able to negotiate a lower base rent. A tenant in a triple net lease may also customize their space and generally operate with more freedom than they would have otherwise in a traditional lease.
Disclaimer: The material and information contained in this article are for informational purposes only. You should not rely on the material or information for making business, legal, tax, or any other decisions.