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Triple Net Lease Questions

A triple net lease is an agreement between a landlord and tenant that makes the lessee (the tenant) solely responsible for all the costs that relate to the lease of an asset, in addition to the rent fee that is stated in the lease. This means that, apart from the rent, the tenant would need to pay net real estate taxes on the leased asset, net building insurance, and net common area maintenance. That’s why this lease is sometimes also called a "net-net-net lease" or a "hell or high water lease".

Listed below are a few questions answered by real estate lawyers on triple net leases.

Are there any advantages to a triple net lease agreement?

One of the biggest advantages of a triple net lease is that all the landlord has to do is to collect rent. He would not be responsible for any of the repairs, maintenance, or improvements on the property. Since the triple net lease makes the tenant liable for maintenance and improvements, the landlord profits not only from the rent money, but also all the work done on the property when the tenant leaves.

Is the rent charged on a triple net lease for commercial property lower than other leases where the landlord has to pay for everything?

This may not always be the case. In certain scenarios where the landlord has agreed to pay all the extra expenses, there is a possibility that he/she would charge a higher rent to cover the costs.

In Texas, can a real estate broker use a hand typed triple net lease so that the prospective renter has to pay for all repairs, maintenance, property taxes, and insurance on a residential property? There is no mention of the return of the renter's deposit at the conclusion of the lease either.

Texas laws state that the unused security deposit must be returned within 30 days of the tenant vacating the leased premises and leaving a forwarding address in writing. Besides this, there is nothing in the state law that prohibits a triple net lease for residential property.

I own a pharmacy in New Jersey with an exorbitant rent and a triple net lease. Is there a way to break this lease without incurring a high penalty? Can the landlord go after the personal assets of my friends who co-signed the lease on behalf of their company?

The best thing would be for you to work this out with your landlord. What you could do is to try and see if you could bring a new tenant in so that the landlord doesn’t lose out on money. In the event that he or she does decide to go after you and your friends, he or she can attach income, bank accounts, and any real property but can’t touch any personal property, like cars or furniture.

A triple net lease is beneficial to the landlord but it can be beneficial to tenants as well, offering them more control over the property. They should have the freedom to add on to the property, to re-arrange things and make the place look exactly the way they want it to. Apart from this, one of the largest benefits they may enjoy is that they should have zero capital investment since they are not purchasing their own property. They should know exactly what their rent payments will be every month since the lease should detail what the increase increments will be and at what intervals they will be made. This may give them more control over their profits as well.
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