Triple Net Lease Explained: What NNN Really Costs and What Most Tenants Get Wrong
The listing says $18 per square foot.
You do the math, budget accordingly, and get ready to sign.
Then the full lease lands in your inbox — and the real number is closer to $26 per square foot.
That gap is the NNN lease. And if you didn't know it was coming, you're already negotiating from the wrong position.
This post breaks down exactly what a triple net lease is, what's included in those three "nets," and what the true cost looks like before you commit.
If you're unsure what your NNN lease is actually going to cost you, run it through Sasir.ai — our AI-powered lease analysis tool. The first scan is free. → https://sasir.ai
What Is a Triple Net Lease?
A triple net lease — written as NNN — is a commercial lease structure where the tenant pays not just base rent, but also three additional categories of operating costs:
Property taxes — your proportionate share of the real estate taxes on the building
Building insurance — the landlord's insurance premiums, passed through to tenants
Maintenance and operating expenses — everything from roof repairs to HVAC to common area upkeep
In a gross lease, the landlord covers those expenses and bakes them into a higher base rent. In a NNN lease, the landlord strips them out and passes them to you directly.
The result: a lower advertised rent that masks a significantly higher true cost.
The Three "Nets" Broken Down
Net 1 — Property Taxes. You pay your pro-rata share of the property tax bill. This fluctuates year to year based on assessed value and local tax rates. If the county reassesses the building upward — your bill goes up. You have no control over this.
Net 2 — Building Insurance. The landlord carries property and liability insurance on the building. In a NNN lease, that premium is passed to tenants based on square footage. Again, you have no control over the policy or the cost.
Net 3 — Maintenance and Repairs. This is the broadest category and the most variable. It typically includes CAM charges (common area maintenance), structural repairs, roof, HVAC, parking lot, and building systems — depending on how broadly your lease defines it.
The dangerous word in NNN leases is "net" — it sounds clean and simple. In practice, it means you're absorbing building-level costs with no cap, no ceiling, and sometimes no audit right.
How the True Cost Adds Up
Here's a real-world illustration. A tenant signs a NNN lease at $18/sq ft on 2,500 sq ft.
Base rent: $18 × 2,500 = $45,000/year ($3,750/month)
Property taxes (pro-rata): ~$4,800/year
Building insurance (pro-rata): ~$1,800/year
CAM and maintenance: ~$6,000/year
Total occupancy cost: ~$57,600/year ($4,800/month)
That's a 28% gap between the advertised rate and what the tenant actually pays. Over a 5-year term, that difference is nearly $63,000.
Now add annual escalations on each of those net categories — and the gap widens every year.
NNN vs. Gross vs. Modified Gross: What's the Difference?
Gross lease: tenant pays base rent only. Landlord covers taxes, insurance, and maintenance. Predictable for the tenant, but base rent is higher.
Triple net (NNN): tenant pays base rent plus all three nets. Landlord's exposure is minimal. Tenant carries the variability.
Modified gross: a negotiated middle ground. Some nets are split — for example, tenant pays CAM but landlord covers taxes and insurance. Terms vary by deal.
There's no universally "best" structure. The right lease type depends on what's predictable for your business model, your margin, and your risk tolerance. The worst outcome is signing a NNN lease while budgeting like it's gross.
What to Negotiate in a NNN Lease
NNN leases are not take-it-or-leave-it. Here's what to push for before you sign:
Expense caps — limit how much taxes, insurance, and CAM can increase year over year (typically 3–5%)
Exclusion of capital expenditures — roof replacements, major structural repairs, and HVAC overhauls should be the landlord's responsibility
Base year protection — establish a base year so you're only paying increases above that baseline, not the full amount from year one
Audit rights — the right to verify the actual invoices behind each net charge, typically within 90 days of the annual reconciliation
Gross-up protection — if the building isn't fully occupied, landlords sometimes inflate operating expenses to what they'd be at full occupancy; your lease should exclude this
A NNN lease can be a fair structure when negotiated properly. The risk isn't the structure itself — it's signing one without understanding what you've agreed to absorb.
The Bottom Line
Triple net leases are common — especially in retail, industrial, and standalone commercial spaces. They're not inherently bad. But they require tenants to understand what they're signing up for before they commit.
The advertised rate is never the full story. Your true occupancy cost is base rent plus all three nets, escalated annually, over the full term of your lease.
If you're looking at a NNN lease and want to know what it's actually going to cost you before you sign, run it through Sasir.ai. Upload your lease and get an instant analysis. The first scan is free. → https://sasir.ai
If you’re navigating a commercial lease, these additional resources may help:
