California Real Estate Broker ExaminationContractsHard
A landlord is reviewing a lease agreement with a tenant for a commercial property. The landlord wants to ensure that the tenant is responsible for paying property taxes, insurance, and maintenance costs in addition to the base rent. What specific term should be used to describe this type of lease?
- AModified gross lease
- BPercentage lease
- CTriple net lease
- DGross lease
Show answer & explanationAnswer & explanation
Correct answer: C. Triple net lease
A 'triple net lease' (NNN) explicitly requires the tenant to pay for property taxes, insurance, and maintenance costs, in addition to the base rent. This is the most comprehensive form of a net lease.
Why the other options are wrong
- A. A modified gross lease is a hybrid where some expenses are passed to the tenant, but not necessarily all three 'nets'.
- B. A percentage lease involves rent based on sales, not primarily expense responsibility.
- D. A gross lease typically has the landlord pay all or most expenses.
Triple Net Lease (NNN)
A commercial lease where the tenant pays a base rent plus all three 'nets': property taxes, building insurance, and common area maintenance (CAM).
- Tenant pays base rent + taxes + insurance + maintenance
- Maximizes landlord's passive income
- Common for single-tenant commercial properties
Memory trick: Triple Net: 'Taxes, Insurance, Maintenance - NNN means ALL on the Tenant!'