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Double Net Lease Explained

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A Double Net Lease or NN Lease is the most commonly used lease in commercial real estate. It is also the most favorable lease to the property owner.

Types of Leases

In a double net lease, the tenant is responsible for paying taxes, rent, and insurance costs. All of these costs are paid directly to the property owner and he is responsible for managing the funds.

If the costs are split between tenants, they are responsible for paying according to their square footage usage.

Pros and Cons for the Tenant 

Pros

  • Cleaning services and upkeep of the building are the property owner’s burden, meaning the tenant won’t have to pay or worry about it.
  • Control over utilities, the tenant can decide to save on utilities and bills.

Cons

  • Big costs for the tenant, that usually is being paid monthly, but can be made yearly or weekly depending on the contract type.
  • Maintenance is the property owner’s job, so if the property owner is not interested in maintaining the property well and on time, the tenants are the ones who suffer.

Pros and Cons for the Property Owner

Pros 

  • Maintenance of the building is the property owner’s task, so he can optimize the costs and save money on it.
  • Constant income from the tenants, including taxes and fees.

Cons

  • The property owner is responsible for taxes and fees, besides the fact that the tenants pay for them, it’s the property owner’s job is to file them. This can be time-consuming and a real hassle.
  • The property owner needs to take care of the maintenance, but also not foreseen expenses and accidents.

Summary 

The double net lease can be a good solution for both parties in certain situations, but before you decide or sign anything, no matter if you are the tenant or the property owner, always make sure to not only read but understand the lease, its cost, and obligations.

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