Triple Net (NNN) Leases: A Complete Guide

Triple Net (NNN) leases are the most common commercial lease structure in Canada. Understanding them is essential for commercial property investors.

A Triple Net lease is a commercial lease where the tenant pays:

• Base rent: The landlord's return
• Property taxes: Their share
• Building insurance: Their share
• Common area maintenance (CAM): Their share

In a true NNN lease, the tenant covers all operating expenses.

What's Included in CAM?

• Parking lot maintenance and snow removal
• Landscaping and grounds keeping
• Common area utilities (hallway lighting)
• Property management fees
• Security services
• Common area cleaning
• Elevator maintenance

CAM Administration

• Tenants pay a pro-rata share based on leased square footage
• Estimated CAM charged monthly
• Year-end reconciliation adjusts for actual costs

Base Rent

• Quoted as price per square foot per year
• Example: $25/sqft for 2,000 sqft = $50,000/year
• May include annual escalations (2-3%)

Lease Term

• Typically 5-10 years
• Renewal options with pre-negotiated terms

Tenant Improvement Allowance (TIA)

• Landlord contribution to fit-up
• Typically $20-$60/sqft
• Higher for longer lease terms

Formula

Total Cost = Base Rent + Property Tax Share + Insurance Share + CAM Share + Utilities

Example

Leased space: 2,000 sqft
Base rent: $25/sqft = $50,000/year
Property tax (pro-rata): $5,000/year
Insurance (pro-rata): $2,000/year
CAM (pro-rata): $8,000/year
Utilities: $6,000/year
Total: $71,000/year ($5,917/month)
Effective rate: $35.50/sqft

Use our Triple Net Lease Calculator for your own calculations.

What to Negotiate

1. Base rent: Compare to market rates
2. CAM inclusions: What's included and excluded
3. CAM cap: Limit annual increases (3-5%)
4. Audit rights: Right to review CAM charges
5. Lease term: Length and renewal options
6. TIA: Amount and conditions
7. Personal guarantee: Limit or remove
8. Assignment/subletting: Flexibility to transfer

For Investors

• Stable income: Long-term leases with credit tenants
• Minimal management: Tenant handles expenses
• Inflation protection: CAM and tax pass-throughs
• Lower cap rates: Premium for NNN stability

Use our Cap Rate Calculator and Cash Flow Calculator for investment analysis.

NNN leases are the standard for commercial real estate. Understand CAM charges, negotiate caps and audit rights, and calculate total occupancy cost. Use our Triple Net Lease Calculator and other Calculators. The AI Advisor can answer NNN lease questions.

This guide is for educational purposes only.