Can Someone explain Net Leasing?
[{"id": "cfkd515", "text": "[net leasing](http://lmgtfy.com/?q=net+lease)", "replies": [{"id": "cfkdgyc", "text": "This. The wikipedia article gives about as good of an overview as there is. ", "replies": [], "depth": 2}], "depth": 1}, {"id": "cfkralz", "text": "Triple net (NNN) means all building expenses are passed onto the tenant. Taxes, insurance, maintenance, utilities all all given to the tenant on a pro rated share based on their square footage. Some people call this a hell or high water lease because the tenant pays everything no matter what. Strip mall tenants and grocery stores normally have leases like this. ", "replies": [], "depth": 1}, {"id": "cfku952", "text": "Why would someone agree to this?", "replies": [{"id": "cfkxgdo", "text": "This is absolutely standard practice for the leasing of retail space in the US. LL usually only covers roof and structural components-- all else is tenant's responsibility. Not to pick on your personally, but when I get potential tenants who don't understand NNN leasing I get nervous bc clearly they have no experience w commercial leases and their agent isnt doing them any favors.  Not necessarily a deal killer on small shop retail, but also not a confidence builder. It can be a predictor of a lot of confused calls and slow payment. For instance , confusion over annual CAM reconciliation, not understanding sub-metered vs CAM water charges, calling LL when their HVAC has a problem, etc etc etc", "replies": [{"id": "cflekmw", "text": "AMEN.", "replies": [], "depth": 3}], "depth": 2}], "depth": 1}, {"id": "cfl8bm3", "text": "Its really just the same thing. Gross rates are higher because they have tax and operating expenses built into the rate. ", "replies": [], "depth": 1}, {"id": "cfq63xy", "text": "In regards to \"Net\" leases, there's:\n\n* *industrial gross* (Net), Tenant pays Rent and utilities, and a portion of property taxes\n* *Net Net* (double net), Tenant pays rent and utilities, and a portion of the property taxes and property insurance\n* *triple net lease*, tenant pays rent and utilities, and pro-rata share of property taxes/insurance/maintenance.\n* *Absolute Net Lease*, tenant pays rent and utilities, and all property expenses. (sometimes roofs/parking lots excluded and property management also can be excluded if the property owner is also the manager)\n\n\nIt is important to ask however what they mean because labels are not standardized ", "replies": [{"id": "cg0vvok", "text": "Best response so far, IMO. I appraise all over the country and each area and property type will have their own idea of what a \"net lease\" is. Make sure you confirm with the agent EXACTLY what the tenant is responsible for. Generally speaking, gross means the tenant pays a base rental amount and that's it. Modified gross would have to be explained, such as \"tenant pays a base rental amount plus separately metered utilities and interior and HVAC maintenance\". I do a lot of retail appraisals, in which triple net is the most common expense reimbursement structure. This typically means the tenant pays a base rental amount, plus separately metered utilities (when possible, reimbursement if not possible), and a pro-rata reimbursement for taxes, insurance, CAM (common area maintenance). Absolute net is usually only used in a STNL (single-tenant net lease), an example of which would be Rite Aid, Walgreens, McDonalds, and the like. The tenant pays all expenses, definitely including roof and outer walls (parking lot typically falls under CAM), and this is typically preferred to be paid directly to the creditor , i.e. the tenant does NOT pay the landlord, and then the landlord pays the taxes, or insurance company, or whatever. An absolute net lease will leave the landlord having virtually zero responsibility. These types of leases are more common with investment grade properties, and investors usually do not pro-forma, or account for, any management or administrative expense. AKA, the income received falls directly to the bottom line. ", "replies": [], "depth": 2}], "depth": 1}]