Triple Net Lease is an agreement where the tenant takes on maintenance costs, certain property-related taxes, and insurance costs related to the lease.
Triple net leases are also sometimes written as 'net-net-net lease' or 'NNN lease' in some business literatures.
- Maintenance: includes minor repair works, cleaning fees, and ad-hoc fault rectifications, but will usually exclude major asset enhancement costs.
- Taxes: includes taxes imposed on the property by state and federal governments, where applicable.
- Insurance: Includes insurance against crime, property damages due to builders' faults, injury or loss of life to tenants, and fire damage.
Triple net leases are seen as hugely favourable to the building owners, or the REIT holding the property.
This is because the building owner of REIT are largely absolved of these operating costs related to the asset, having passed them on to the tenants or lessees.
As such, REITs with triple net leases enjoy relatively lower CAPEX as compared to REITs without similarly favourable lease agreements.
Triple net lease arrangements are usually taken on by master lessees of a property, most commonly hotel and hospital operators.