What is a double net lease in commercial real estate?

What is a Double Net Lease?

A double net lease, often referred to as a "net-net" or "NN" lease, is a type of real estate lease agreement where the tenant is responsible for both property taxes and insurance premiums in addition to the base rent. In a double net lease, the landlord typically remains responsible for structural repairs and maintenance of the building. This type of lease is commonly used in commercial real estate, especially in retail and industrial properties.

Under a double net lease, the tenant's responsibilities typically include:

  • Base Rent: A set amount of rent paid to the landlord, which can be fixed or subject to scheduled increases over the term of the lease.
  • Property Taxes: The tenant pays for the property taxes associated with the leased property.
  • Building Insurance: The tenant also pays for the insurance premiums for the building. This does not typically include the landlord's liability insurance but covers the structure itself against fire, flood, or other hazards.

The landlord, on the other hand, is generally responsible for maintaining and repairing the building's structure and common areas. This arrangement allows the landlord to have a more predictable income stream, as the variable costs of taxes and insurance are passed on to the tenant. For tenants, a double net lease can offer lower base rent compared to a gross lease, where all expenses are included, but it requires taking on more risk and variability in operating costs.

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