Key Takeaways
- Triple net leases (NNN) transfer the burden of property taxes, insurance, and maintenance to tenants, giving landlords more predictable and consistent income streams.
- Landlords, however, usually remain responsible for major structural components and significant capital expenditures, such as roof or HVAC system replacements.
- For landlords, key advantages include steady returns, reduced day-to-day management, and stronger tenant profiles—while risks center on potential vacancies and limited control over property operations.
- Tenants benefit from lower base rent and greater autonomy in managing property operations.
- Investors should carefully assess location, tenant credit strength, lease duration, and the property’s condition before acquiring NNN assets.
- Triple net properties are frequently used in 1031 exchanges and are favored by investors pursuing long-term, stable cash flow.
Triple net properties are highly attractive to investors seeking steady, predictable income that is low-risk, low-touch, and long-term. This is because, in most cases, the majority of financial obligations tied to the property—such as taxes, insurance, and maintenance—are passed directly to the tenant under an NNN lease.
However, the ultimate division of costs between tenant and landlord depends on how the lease terms are negotiated and documented in the agreement. Since these terms can vary significantly across triple net leases, one of the most frequent—and most critical—questions investors ask is: What expenses does the landlord cover in a triple net lease?
This article will outline the most common financial responsibilities of both tenants and landlords in an NNN lease and clarify where costs may be divided or shared depending on the specific lease terms.
How Triple Net Leases Work
A triple net lease (NNN) is structured so the tenant covers three primary operating expenses: property taxes, building insurance, and maintenance. In addition to these costs, the tenant also pays base rent. Because the tenant assumes responsibility for these expenses, the landlord’s role is largely streamlined to collecting rent and addressing major structural concerns.
For tenants, this arrangement typically results in lower base rent compared to a gross lease. For landlords, it delivers predictable income while minimizing exposure to rising operating expenses.
Gross vs. Net Leases
Lease structures can vary significantly, and understanding these distinctions underscores the value of a triple net lease.
- In a gross lease, the landlord covers all operating expenses while the tenant is only responsible for rent.
- In a single net lease (N), the tenant pays rent plus property taxes.
- In a double net lease (NN), the tenant pays rent, property taxes, and insurance.
- In a triple net lease (NNN), the tenant takes on rent, property taxes, insurance, and maintenance.
By shifting these costs to the tenant, net leases—particularly NNN leases—deliver income stability for landlords while offering tenants greater control over property management.
What Does the Tenant Pay in an NNN Lease?
Net lease real estate is popular among both landlords and tenants, but in exchange for using a triple net property as a place of business, tenants typically assume most of the expenses tied to building upkeep, including:
- Monthly Rent: Tenants pay an agreed-upon amount of rent each month for the use of the building and property as outlined in the lease agreement.
- Property Taxes: In a triple net lease, annual property taxes are generally passed along to the tenant, who must cover them as part of their operating costs.
- Maintenance Fees: NNN leases specify maintenance obligations that are typically the tenant’s responsibility, though certain costs may be shared with the landlord depending on the agreement.
- Insurance: Triple net lease tenants are responsible for securing and paying for insurance policies on the building—including deductibles and claims—while landlords are usually listed on the policies and may share limited responsibility.
- Utilities and Fees: Tenants cover utilities, bills, and fees associated with operating the building, though major utility repairs may remain a landlord’s responsibility depending on lease terms.
What Does the Landlord Pay in a Triple Net Lease?
Triple net real estate can be highly advantageous for property owners and landlords, as many expenses that typically fall under ownership—such as taxes, maintenance, and repairs—are passed through to tenants. However, NNN properties do still carry certain costs that remain the landlord’s responsibility, including:
- Property Mortgage: If the property is financed, the landlord is responsible for the monthly mortgage payments, along with any financing fees or interest over the life of the loan. These costs, however, can often be offset by tenant rent payments.
- Insurance: While most insurance costs, deductibles, and claims are typically the tenant’s responsibility, the landlord must still be listed on property insurance policies, and in some cases, certain types of coverage may remain the owner’s obligation. Reviewing lease terms carefully—or negotiating them upfront—is essential to avoid unexpected exposure.
- Maintenance: Day-to-day operating costs usually fall to the tenant, but major structural repairs or large-scale utility upkeep are often the landlord’s responsibility. Common examples include:
- Roof (repairs, maintenance, or replacement)
- Exterior walls
- Major utility systems, such as plumbing and electrical infrastructure
What’s Not Included in a Triple Net Lease
Even in a triple net lease, not every expense is shifted to the tenant. Landlords typically remain responsible for:
- Structural elements such as the roof, foundation, and exterior walls
- Major capital repairs, including HVAC replacement or parking lot resurfacing
- Certain insurance coverage is tied to financing requirements
Clear and precise lease language is essential to define which costs are excluded, helping prevent disputes and ensuring both parties have aligned expectations.
Benefits for Landlords
Triple net leases offer several advantages that make them a preferred strategy for both investors and property owners:
- Predictable Income: With tenants covering operating expenses, landlords benefit from more stable and consistent returns.
- Lower Involvement: NNN leases typically demand less day-to-day management from landlords.
- Stronger Tenants: Corporate and national tenants often favor NNN lease structures, adding stability and reducing default risk.
- Favorable Financing: Because lenders view NNN properties as lower risk, landlords may secure more attractive loan terms.
For owners seeking consistent returns with minimal oversight, these advantages make NNN leases a highly compelling investment option.
Risks for Landlords
No lease structure is entirely risk-free, and triple net agreements carry several considerations landlords should monitor:
- Vacancy Risk: If the property becomes vacant, the landlord must cover expenses until a new tenant is secured.
- Limited Control: Because tenants oversee day-to-day maintenance, the long-term condition of the property may be affected.
- Reconfiguration Challenges: Properties tailored to a single tenant can be more difficult to adapt for future occupants.
Understanding these risks enables landlords to plan proactively and safeguard the property’s long-term value.
What Tenants Gain
From the tenant’s perspective, triple net leases deliver several compelling advantages:
- Lower Base Rent: NNN leases typically offer lower base rent compared to gross leases.
- Operational Control: Tenants gain greater authority over property management and maintenance decisions.
- Cost Transparency: Expenses such as taxes and insurance are paid directly, providing clarity and predictability.
For tenants with strong operational needs—such as retailers, medical groups, or national chains—the ability to control the property environment can be just as valuable as the rent savings.
Factors to Consider When Investing in Triple Net Properties
For investors evaluating a triple net property, due diligence extends well beyond the lease terms. Key considerations include:
- Location Quality: Properties in strong, growing markets are better positioned for long-term performance.
- Tenant Strength: Creditworthy or national tenants help reduce risk and enhance stability.
- Lease Length: Longer lease terms provide greater income predictability and security.
- Property Condition: Older buildings may carry the risk of unexpected capital expenditures.
- Financing Terms: Lenders often view predictable lease structures favorably, which can result in more attractive financing options.
A thorough review of these factors ensures the investment aligns with both short- and long-term objectives.
The Bigger Picture for Investors
Triple net leases have become a cornerstone of passive real estate investing, offering predictable income, long-term leases, and creditworthy tenants that appeal to investors seeking stability.
These properties can also serve as a powerful tool in tax planning, as many investors leverage NNN assets in 1031 exchanges to defer capital gains while upgrading their portfolios.
In short, triple net leases combine the security of reliable income with the flexibility to grow and diversify investment holdings over time.
Conclusion: Building Long-Term Value with Triple Net Leases
An important consideration when exploring NNN properties for sale is that lease terms can vary significantly, making it essential to carefully review existing agreements and seek expert negotiation guidance before moving forward.
Triple net leases strike a balance between stable income and reduced management responsibilities, making them one of the most attractive structures in commercial real estate. While landlords remain responsible for certain big-ticket items, the predictability of tenant-paid expenses and the long-term security of corporate-backed leases often outweigh the risks.
For investors, NNN properties can serve as a cornerstone of a portfolio—delivering steady cash flow, resilience in shifting markets, and strategic advantages such as favorable financing and 1031 exchange opportunities.
Sands Investment Group (SIG) is a commercial real estate advisory firm dedicated to helping private investors and institutions across the U.S. discover, buy, and sell the ideal investment properties. Our team of brokers is trusted experts in their respective sectors—from restaurants to shopping centers and everything in between—bringing market knowledge, strong relationships, and a client-first approach to every transaction.
At Sands Investment Group, our team specializes in identifying high-quality triple net lease opportunities and guiding clients through the nuances of these investments. Whether you’re seeking a reliable income stream, portfolio diversification, or tax-efficient strategies, we’re here to help you unlock the full potential of NNN properties. Connect with a SIG Advisor today.
