There are many answers to that question, but it’s generally for accounting purposes. We won’t go into the details here, but what we would like to discuss are the differences between Triple Net leases NNN and Gross leases. Generally speaking, the out of pocket expense will actually be very similar, however, “The Devil Lies in the Details”.
On a Gross lease, the Property Taxes, Building Insurance and Maintenance are not technically paid for by the tenant. However in reality, those costs are already factored into the rental price. The ‘Extra Fees’ that tenants often complain about come through in the form of Common Area Maintenance fees, or CAM’s. In addition to CAM’s, Tenants can generally be billed back for increases in Property Taxes, Insurance and Maintenance over the base year’s tax amount. Please contact us for a more detailed description of typical CAM fees.
On a true NNN lease, the NNN represents the tenant’s responsibility to pay the Property Taxes, Insurance and Maintenance on the building. Typically the NNN charges are paid upfront by the landlord and then billed back to the tenant on a quarterly basis.
On a side by side comparison, the monthly costs are similar, but again, “The Devil Lies in the Details”. A NNN lease has ‘Pass Through Expenses’, similar to a Gross lease, but the list of potential ‘Pass Through Expenses’ is huge.