Question

The rental income generated by a lease can depend significantly on the proportion of property-level operating expenses paid by the tenant. In which of the following types of leases is the tenant responsible for all operating expenses?1. Gross lease2. Net lease 3. Net-Net lease4. Triple net lease

Answer 1

4) Triple net lease

Step-by-step explanation:

In a triple net lease (NNN lease), the tenant is responsible for all the expenses related to the leased property including property taxes, maintenance fees, reparations and property insurance. NNN leases are usually commercial leases only.

The landlord's disadvantage with a NNN lease is that the monthly lease payment tends to be lower since the tenant assumes all the costs related to the leased property. On the other hand, a NNN lease generally provides a stable cash flow, so its associated risk is lower.