The net lease entails the tenant to pay, on top of the fixed rent, some or every expense regarding the property, which in most cases, is usually paid by the landlord. This could include a wide range of expenses from utilities, repairs and maintenance to taxes and insurance.
In the written lease, the exact items that are required to be paid are generally specified. Depending on this size of the area and how many tenants occupy a property, it is common to divide the expenses depending on the square footage.
It is common for people to associate net lease with the term gross lease , and assume they have similar meanings. In fact, in a net lease, the landlord gets rent after the expenses have been paid. On the other hand, in a gross lease, the tenant pays a certain amount of rent, which is then used by the landlord to pay expenses.
There are different types of net leases – single net lease, double net lease and triple net lease. Single net leases means the tenant is responsible for payment of rent and property taxes . Double net leases , which aren't very common, means the tenant is in charge of paying real estate taxes and building insurance whilst the landlord is responsible for structural repairs as well as area maintenance. Triple Net leases are when a tenant must pay taxes, insurance, rent, maintenance expenses as well as any normal fees to the landlord.
Triple Net leases, otherwise known as true net leases, means that the landlord has no responsibilities regarding the up keeping of the building. This has its obvious advantages and disadvantages – if the tenant keeps it in good condition, a high level of income for the building will be produced. However if the tenant is unable to pay bills or meet the needs of the building, this clearly brings a major issue for both landlord and the tenant.
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