Triple Net Lease (NNN)

What the three "nets" actually are

• ✓Property taxes — the tenant's pro-rata share of real estate taxes assessed against the property, billed as they're paid or reconciled annually against escrow estimates
• ✓Insurance — the tenant's share of the landlord's property (and often liability) insurance premiums, separate from any tenant-carried liability policy the lease also requires
• ✓Common area maintenance (CAM) — landscaping, parking lot repair, common utilities, property management fees, and other shared operating costs, allocated by the tenant's pro-rata share of the building
• ✓Together these three categories are billed on top of base rent, typically via monthly estimated payments trued up to actual costs at year-end reconciliation

Worked example

A 10,000 sq ft tenant in a 100,000 sq ft building signs an NNN lease at $22.00/sq ft base rent. The building's annual property taxes are $180,000, insurance is $40,000, and CAM is $280,000 — a combined $500,000, or $5.00/sq ft across the building.

The tenant's pro-rata share is 10% (10,000 ÷ 100,000 sq ft), so its NNN charge is $50,000/year ($5.00/sq ft × 10,000 sq ft), or roughly $4,167/month, billed alongside base rent of $18,333/month. All-in occupancy cost for the tenant is $27.00/sq ft ($22.00 base + $5.00 NNN) — the figure that should be compared against a gross-lease quote, not base rent alone.

At year-end, the landlord reconciles actual taxes, insurance, and CAM against what was billed in estimated payments; the tenant owes the shortfall or receives credit for any overbilling, per the reconciliation mechanism in the lease.

Where NNN sits among lease structures

• ✓Gross lease: base rent only; the landlord absorbs 100% of operating expenses, taxes, and insurance with no pass-through
• ✓Modified gross lease: base rent covers costs up to an expense stop (usually set to a base-year figure); the tenant reimburses only the excess above the stop — see our operating expense stop page
• ✓Single/double net lease: the tenant covers one or two of the three nets (commonly taxes, or taxes plus insurance) while the landlord retains CAM or another category — less common in institutional office and retail
• ✓Triple net (NNN): the tenant covers all three nets from dollar one; quoted base rent is correspondingly lower because none of the pass-through categories are baked into it

Abstracting traps our specialists check for

• ✓Reading base rent alone: comparing a $22.00 NNN quote to a $27.00 gross quote as if they were the same metric materially understates the NNN deal's true occupancy cost
• ✓Pro-rata share basis: the tenant's percentage should be defined against the same denominator (rentable vs. gross building area) the lease actually specifies — a mismatch here misallocates every dollar of CAM, tax, and insurance
• ✓Capped vs. uncapped CAM: some NNN leases cap annual CAM increases (often 3–5% year-over-year) even though taxes and insurance remain uncapped — missing the cap in the abstract overstates future CAM exposure
• ✓Exclusions from CAM: capital expenditures, leasing commissions, and debt service are typically carved out of what counts toward the CAM pass-through — the same category of exclusions covered on our CAM reconciliation page — and a landlord that includes an excluded item overbills every tenant sharing the pool
• ✓Audit rights: most NNN leases give the tenant a window (often 60–120 days after receiving the reconciliation) to audit the landlord's CAM books; the deadline itself is a date worth tracking, not just the right