Florida Real Estate Broker ExaminationProperty Management and LeasingMedium
A property manager is reviewing a commercial lease agreement for a new retail tenant. The lease specifies that the tenant is responsible for paying a fixed monthly rent, plus a pro-rata share of the building's property taxes, insurance, and common area maintenance (CAM) charges. What type of lease agreement is this?
- AGross lease
- BTriple Net (NNN) lease
- CModified Gross lease
- DPercentage lease
Show answer & explanationAnswer & explanation
Correct answer: B. Triple Net (NNN) lease
A Triple Net (NNN) lease requires the tenant to pay a fixed rent plus all three 'nets': property taxes, building insurance, and common area maintenance (CAM) charges.
Why the other options are wrong
- A. A gross lease typically includes all operating expenses in the base rent, with the landlord paying them.
- C. A modified gross lease is a hybrid, where some, but not all, operating expenses are passed through to the tenant, but not typically all three 'nets'.
- D. A percentage lease involves a base rent plus a percentage of the tenant's gross sales.
Triple Net (NNN) Lease
A commercial lease agreement where the tenant pays a fixed base rent plus all operating expenses of the property, including property taxes, building insurance, and common area maintenance (CAM).
- Tenant pays base rent + taxes (N1), insurance (N2), and CAM (N3).
- Common in commercial and industrial properties.
- Shifts most property operating expenses to the tenant.
Memory trick: Net, Net, Net, the tenant's debt, for taxes, insurance, and CAM, you bet!