Key Takeaways
- A double net lease requires tenants to pay property taxes and insurance premiums, reducing the landlord’s financial burden.
- Typically found in commercial real estate, a double net lease often results in lower base rent for the tenant due to the added expenses they cover.
- Triple net leases pass all major expenses (taxes, insurance, maintenance) to the tenant, which can lead to rent concessions if costs increase unexpectedly.
- In a gross lease, the landlord covers all maintenance, insurance, and tax costs, usually resulting in higher rent to compensate.
- Bondable net leases, a type of triple net lease, prevent early termination and fixed rent changes regardless of cost increases.
What Is a Double Net Lease?
A double net lease (‘net-net’ or ‘NN’ lease) is a commercial lease where the tenant pays property taxes and building insurance, in addition to base rent. It’s more tenant-paid cost than a single net lease (taxes only) but less than a triple net lease (taxes, insurance, and often maintenance), so understanding the differences helps commercial tenants compare true occupancy costs.
Understanding Double Net Leases: Tenant and Landlord Responsibilities
Net leases are just like owning property without actually having legal title over it. They are lease agreements between landlords and tenants where the tenant pays for rent and any other cost associated with the property in question. The agreement may include one or more expenses including insurance, property taxes, utilities, maintenance and repairs, and other operational costs. Most landlords generally accept lower rent payments because of the additional costs associated with net leases.
Double net leases are most commonly found in commercial real estate. For commercial properties with multiple tenants, such as a shopping mall, taxes and insurance fees may be assigned to the individual tenants on a proportional basis. Owners should have property taxes billed through them to be aware of any payment issues, even when tenants are responsible for them.
Comparing Double Net Leases With Other Net Lease Types
In a single net lease, the lessee or tenant is responsible for paying property taxes. Single net leases are not common
A triple net lease (also known as an ‘NNN’ lease) is a lease agreement in which the tenant or lessee agrees to pay all real estate taxes, building insurance and maintenance, in addition to normal expected costs under the agreement (rent, utilities, etc.). In such a lease, the tenant or lessee is also responsible for all costs associated with the repair and maintenance of any common area. This form of lease is common for freestanding commercial buildings, but it can also be used in single-family residential rental leases.
When maintenance costs are higher than expected, tenants under triple net leases frequently attempt to get out of their leases or obtain rent concessions. Many landlords prefer bondable net leases. These leases, a type of NNN lease, cannot be ended early and do not allow rent changes, even if costs rise unexpectedly.
Gross Lease vs. Net Lease: Key Differences in Commercial Real Estate
In contrast to net leases, a typical commercial gross lease, the landlord pays all of the building’s maintenance, insurance, and property taxes. The costs of these services are often reflected in higher monthly rent. It’s common for the tenant to accept reasonable caps on the landlord’s exposure to the tenant’s use of these services and utilities. Often, parties will agree to a “base year” estimated expense, with the landlord billing the tenant for any overage.
The Bottom Line
A double net (NN) lease has the tenant pay property taxes and insurance, more than a single net lease but less than a triple net lease. Common in commercial multi-tenant buildings, these costs are often allocated by a tenant’s share, and unlike a gross lease, more property expenses fall directly on the tenant, affecting total budgeting.
