NNN means triple net: a NNN lease is a commercial lease in which the tenant pays base rent plus the building's property taxes, insurance and maintenance. Each N stands for one net, a cost that base rent leaves out.
Base rent is the fixed rent for the space, quoted per square foot per year. The three nets come on top. A NNN rent therefore looks low beside a gross rent, which already includes them.
The US Office of the Comptroller of the Currency (OCC) supervises national banks. Its lending handbook defines a net lease as one in which the tenant "must pay operating expenses such as real estate taxes, insurance, and maintenance" (OCC handbook).
The Internal Revenue Service (IRS) wrote a similar definition into its Revenue Procedure 2019-38. A triple net lease "requires the tenant or lessee to pay taxes, fees, and insurance, and to pay for maintenance activities for a property" (IRS, triple net definition).
Neither definition sets a standard form. Two leases that both say NNN can split the roof, the parking lot and the insurance deductible differently, so the wording of the lease decides who pays.
A Canadian lease usually bills the three costs as additional rent, or as TMI: taxes, maintenance and insurance. Our leasing guide sets the triple net lease beside gross and modified gross leases.
Single net and double net leases pass fewer costs to the tenant. A single net lease adds one cost to base rent, usually property taxes. A double net lease adds "two incidentals", often property taxes and insurance, and the landlord "covers all other expenses" (Business Development Bank of Canada).
The table shows the usual split, which a lease can change.
| Cost | Single net (N) | Double net (NN) | Triple net (NNN) | Absolute net |
|---|---|---|---|---|
| Property taxes | Tenant | Tenant | Tenant | Tenant |
| Building insurance | Landlord | Tenant | Tenant | Tenant |
| Maintenance and repairs | Landlord | Landlord | Tenant | Tenant |
| Roof and structure | Landlord | Landlord | Landlord, in most leases | Tenant |
The roof and the structure usually stay with the landlord. For single-tenant industrial buildings, the OCC describes leases "with the landlord responsible for maintaining only the roof and outer walls" (OCC, industrial property).
An absolute NNN lease, also called an absolute net or bondable lease, moves the last landlord costs to the tenant. The tenant repairs the roof and the structure, and in the strictest form it keeps paying rent after a fire or a flood. The label has no official definition, so read what the lease says about casualty and rebuilding.
NNN expenses are the three groups of operating costs a triple net tenant pays on top of base rent: the building's property taxes, its insurance and its maintenance. Landlords also call them NNN charges, NNN fees or the nets.
- Property taxes. The yearly tax a city or county levies on the land and the building. The landlord pays the bill and recovers it, or the tenant pays the tax office directly.
- Insurance. The premium on the landlord's policy for the building. The tenant buys separate cover for its own contents and liability.
- Maintenance. The upkeep of the building and the site. In a property with several tenants, this net is common area maintenance (CAM).
In a shared building, a tenant pays a pro rata share of each net: its leasable area divided by the building's.
The tax net varies most from one city to the next. The Lincoln Institute of Land Policy and the Minnesota Center for Fiscal Excellence price the same commercial property in the largest city of each state. In 2025, the effective tax rate on a commercial property worth $1 million averaged 1.757% across those cities (Lincoln Institute, property tax study). An effective tax rate is the yearly tax divided by the property's market value.
Source: Lincoln Institute of Land Policy and Minnesota Center for Fiscal Excellence, 50-State Property Tax Comparison Study for Taxes Paid in 2025 (April 2026), Figure 3: effective tax rate on a $1 million commercial property and its fixtures, largest city in each state.
The study adds $200,000 of fixtures to the building, so each rate applies to $1.2 million. At the average rate the yearly tax bill is $21,084. At Detroit's 4.04% it is $48,480, and at Cheyenne's 0.64% it is $7,680.
A sale can reset the tax net. After a change in ownership, Proposition 13 "requires the county assessor to reassess the property to its current fair market value" (California Board of Equalization). That rule covers the sale of a building under a lease with "a remaining term (including written renewal options) of less than 35 years" (California BOE, lease rules).
Take a building assessed at $700,000 that sells for $1,000,000, and assume a 1.2% tax rate. The yearly bill rises from $8,400 to $12,000, and a NNN tenant pays the difference. Some tenants negotiate a clause that keeps a sale-driven increase with the landlord.
Add the three nets to base rent, then divide by the floor area. Take a freestanding building of 4,000 square feet, leased to a veterinary clinic at $16.50 per square foot NNN. The building is worth $1 million and its tax bill is the study's average. The insurance and maintenance figures are assumptions.
| Line | Per year | Per square foot |
|---|---|---|
| Base rent | $66,000 | $16.50 |
| Property taxes | $21,084 | $5.27 |
| Insurance | $3,600 | $0.90 |
| Maintenance | $7,200 | $1.80 |
| Total NNN expenses | $31,884 | $7.97 |
| Full yearly cost | $97,884 | $24.47 |
The clinic pays $8,157 a month, and the nets make up about a third of it.
Keep the building, the rent and the other two nets, then change the city. With Detroit's tax bill the full cost is $31.32 per square foot. With Cheyenne's it is $21.12. Two listings at $16.50 NNN can sit $10.20 per square foot apart, so ask for the nets before comparing rents.
A triple net lease moves the risk of rising taxes, insurance and repairs from the owner to the tenant. In exchange, the tenant pays a lower base rent and controls the building's upkeep.
| Topic | Tenant | Owner |
|---|---|---|
| Base rent | Lower than a gross rent for the same space | Set by the lease, with scheduled increases |
| Rising costs | Paid by the tenant as they rise | Passed through, so net income holds |
| Control | Chooses the vendors and the level of service | Gives up day-to-day management |
| Main risk | A reassessment, a premium jump or a large repair | The tenant's credit, and re-leasing at expiry |
For the owner, NNN rent behaves like a bond coupon: a fixed schedule from one payer over a long term. Investors group these buildings as NNN properties and compare them by tenant credit and remaining lease term.
An IRS safe harbor lets some rental real estate count as a trade or business for the section 199A deduction. It excludes "real estate rented or leased under a triple net lease" (IRS, safe harbor exclusions). Missing the safe harbor "does not preclude a taxpayer" from showing a trade or business another way, so a tax adviser makes that call.
A single-tenant net lease (STNL) property is a freestanding building leased to one tenant on net terms: such as a pharmacy, a bank branch or a warehouse. One lease supplies all of the income.
The OCC notes that retail anchor tenants often sign "leases of 20 to 25 years with options to renew" (OCC, retail lease terms). The owner's risk is concentration. When the one tenant leaves, the income stops while the taxes, the insurance and the upkeep return to the owner.
A lender underwrites a NNN property through its lease: the tenant's credit, the remaining term and the costs left with the owner.
The measure is net operating income (NOI): a building's yearly income less its operating expenses, before any loan payment. Under a NNN lease the tenant pays most of those expenses, so NOI sits close to base rent. A lender reads the lease to see which costs stay with the owner. The OCC calls that reading "critical to developing an accurate estimate of cash flow and NOI" (OCC, net lease definition).
The clinic's lease leaves the roof and the structure with the owner, and a lender sets aside $2,000 a year for them. NOI is $66,000 less $2,000, or $64,000. At a 6.5% cap rate the building is worth about $985,000.
Suppose the three nets rise 10%, or $3,188. The clinic pays the increase and the owner's NOI stays at $64,000. Under a gross lease at the same total rent, the owner absorbs the $3,188. The building then loses about $49,000 of value at the same cap rate.
Lenders test the debt service coverage ratio (DSCR): NOI divided by the yearly loan payments. The OCC says a lower DSCR may be "appropriate for properties with stable and certain cash flows, such as those with long-term net leases to highly creditworthy tenants" (OCC, debt service coverage).
On a one-tenant building, the lender studies three things:
- Tenant credit. Who signed the lease: the parent company, a subsidiary or a franchisee.
- Remaining term. A lease that ends before the loan matures leaves the lender exposed to an empty building.
- Side agreements. The OCC's loan file checklist asks for agreements with tenants beyond the lease, such as "co-tenancy clauses, go-dark clauses" (OCC, loan documentation). A go-dark clause covers a tenant that closes its store and keeps paying rent.