Triple-Net Lease (NNN)

A triple-net lease, often abbreviated NNN, is a commercial lease structure in which the tenant pays not only base rent but also the three major operating costs of the property: real estate taxes, building insurance, and maintenance. Because the tenant bears these variable expenses, the landlord receives a relatively predictable, "net" stream of rental income with limited operating responsibilities, which is why triple-net properties are popular with passive investors. The structure is common in single-tenant retail, pharmacy, quick-service restaurant, and industrial properties leased to creditworthy national tenants under long-term contracts, often 10 to 25 years with scheduled rent escalations. Triple-net assets are frequently used inside Delaware Statutory Trusts because their stable, low-management income suits the DST's passive, no-active-management framework and the program's restrictions on the trustee's operational discretion. The chief advantages for investors are income predictability and minimal landlord duties; the chief risks are concentration in a single tenant, since a vacancy or tenant bankruptcy can eliminate income from a single-tenant building, and the credit quality of that tenant. Investors evaluating NNN-backed DSTs should scrutinize tenant credit, remaining lease term, rent escalations, and what happens at lease expiration or in a default.