In a triple net lease agreement, the tenant assumes responsibility for most costs associated with the property. This typically includes property taxes, building insurance, and maintenance expenses. The lessor’s financial obligations are significantly reduced compared to a gross lease. An example involves a commercial building where the lessee directly remits property tax payments to the local government, maintains comprehensive insurance coverage, and covers all repair costs related to the structure and grounds.
This type of leasing arrangement offers predictability for the lessor, as the net rental income is relatively stable. It can streamline financial planning, as many of the variable expenses are passed on to the lessee. Historically, this structure became popular for long-term commercial leases where the lessor sought a hands-off management approach and a consistent revenue stream. The reduced administrative burden and lower risk profile are attractive to lessors seeking passive income from their real estate investments.
