If you own commercial real estate, a Triple Net Lease is a way to make sure your tenants cover all the expenses associated with owning and operating the property. Each "Net" refers to another type of expense, which typically include property taxes, insurance, maintenance, repairs, utilities and other items.
Use the Triple Net Lease document if:
- Own commercial property that will be leased to a tenant.
- Want to lease commercial rental property from a landlord who does not have a lease form.
Other names for a Triple Net Lease:
Net-Net-Net Lease (NNN).
Types of Triple Net Leases:
Typically used for free standing commercial buildings but may also be used for single-family residential rental real estate.
Information needed for creating a Triple Net Lease:
You'll need to have some information at the ready to create your Triple Net Lease, but most of it you probably know off hand. We'll guide you through the process with our step-by-step process so all you'll have to do is answer a few simple questions. Here are some of the key provisions in a Triple Net Lease:
- The agreement effective date: This is the date on which the lease will start. This can be the date the lease is signed or a date in the future.
- Names and addresses of parties to the agreement: This includes the Landlord and Tenant.
- Description of property being leased: For example, 2,500 square foot single-family home with 3 bedrooms and 2 baths. Can also include a sketch or legal description of the property. The legal description may be found on mortgage documents or the deed.
- Term property is being leased: The beginning and end date of the lease term.
- If Landlord makes alterations to the property, number of days prior notice provided: State actual number of days.
- Payment information: This includes how often payments will be made (i.e., monthly) and the amount of payment (i.e., $2,500); when payments will be made (i.e., first day of the month); where payments will be made (i.e., address of Landlord).
Optional terms for your Triple Net Lease:
You'll need to have some information at the ready to create your Triple Net Lease but most of it you probably know off hand. We'll guide you through the process with our step-by-step process so all you'll have to do is answer a few simple questions. Here are some of the key provisions in a Triple Net Lease:
- Security deposit required: Specify the amount of the deposit.
- Late lease payment penalty: Specify days after due date of lease payment, that payment will be considered late (i.e., 4 days) and amount of penalty for late payment as flat fee (i.e, $50) or percentage of lease payment (i.e., 2%).
- Fee for returned checks. Specify amount (i.e., $40)
- Penalty for early termination of lease: If Tenant terminates lease early, specify notice period (i.e., 45 days) and amount of penalty for early termination (i.e., one month rent).
- Whether or not Landlord can terminate lease if property is sold during lease term: Specify notice period (i.e. 60 days)
- Tenant’s use of premises is limited: Describe the limited use (i.e., Monday – Friday from 9am to 3pm as a licensed daycare facility.) You may leave this blank.
- Include parking privileges: Include the number of parking spaces for tenant (and guests, if provided).
- Storage provided to Tenant: Describe the storage area (i.e., the closet in the back of the garage).
- Landlord is providing furnishings: Describe these (i.e., living room couch and two wood end tables).
- Charges for damage to certain property by Tenant: Describe the item (i.e., living room couch) and amount for damage (i.e., $300).
- Landlord’s duty to repair property: If partially destroyed (i.e., by fire) and maximum amount Landlord is required to spend to repair (i.e., $25,000).
- Require Tenant to have casualty insurance for the property: Specify amount covered or percentage of replacement value.
- Require Tenant to have liability insurance for personal property damages and/or personal injury: Specify either total limits for each category or specific limits per person, per accident or per damage.
Notes about automatic lease renewal in your Triple Net Lease:
Often, a landlord and tenant will agree that their lease will automatically renew unless there is advance, written notice to the landlord. A few things to keep in mind:
- Automatic renewals may not be allowed in some states. You may want to consult a real estate attorney that can advise you.
- You will want to include a specific time period for lease renewal (i.e., another month)
- You will also want to specify the time period to give written notice preventing automatic renewal (i.e., 60 days)