Glossary / Lease terms and deal stages
Also known as: NNN lease, net-net-net lease, net lease
A triple net lease is a commercial lease in which the tenant pays base rent plus the property's real estate taxes, building insurance, and maintenance, the three "nets." Because these costs sit outside base rent, the base rent on a NNN deal is lower than a comparable gross rent.
Wikipedia defines a triple net lease as one where the tenant agrees to pay "all real estate taxes, building insurance, and maintenance (the three 'nets') on the property in addition to any normal fees." It also describes single net leases (tenant pays taxes) and double net leases (taxes and insurance).
The SIOR lease glossary defines a triple net or net lease as one in which the tenant pays, in addition to Base rent, "some or all of property taxes, insurance, repairs, utilities, and maintenance." These are often billed as CAM charges and other pass-throughs based on the tenant's Pro rata share.
On a NNN lease, the nets are not part of base rent. If your commission is calculated on base rent, as in a Grubb & Ellis commission agreement that used aggregate base rent and excluded operating expense increases, then the nets add nothing to your fee. If your agreement uses total rent, as a CBRE agreement with the State of Michigan did, how the nets are treated depends on the agreement's wording.
The result is that two deals with similar total occupancy cost can produce different commissions depending on whether they are quoted net or gross.
On NNN deals, assume your commission is on base rent only unless your agreement clearly says otherwise.
For example, on a hypothetical 5-year NNN lease of 10,000 square feet at $20 per square foot base rent, with nets estimated at $8 per square foot, total base rent is $1,000,000 and the nets total about $400,000. At a hypothetical 5% rate on base rent only, the commission is $50,000.
