Net Lease

Example

“The retail store signed a triple net lease, meaning they would pay the base rent plus property taxes, insurance, and maintenance costs.”

Memory Tip

In a net lease, the tenant gets "caught in the net" - they're responsible for expenses beyond just rent.

Why It Matters

Net leases provide landlords with more predictable income streams and reduce their management responsibilities, while tenants gain more control over property operations and costs. Understanding the type of net lease is crucial for accurately budgeting occupancy costs and negotiating favorable terms.

Common Misconception

Many assume that net lease rent is lower than gross lease rent, but the base rent amount depends on various factors and the total occupancy cost should be compared, not just the rent.

In Practice

A retail tenant signing a triple net lease for $20 per square foot might also pay an additional $8 per square foot for their share of property taxes, insurance, and common area maintenance, making their total occupancy cost $28 per square foot. The tenant would also be responsible for increases in these expenses over time.

Etymology

"Net lease" uses "net" from Old English meaning "after deductions," combined with "lease" from Old French "laissier" meaning "to let go" - describing a lease where additional costs aren't "let go" by the landlord.

Common Misspellings

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