In the field of commercial real estate, especially in the United States, net rent requires the lessee to pay, in addition to the rent, some or all of the property costs that would normally be paid by property owner (known as "landlord" or "lessor "). This includes expenses such as property taxes, insurance, maintenance, repairs, and operations, utilities, and other items. These expenses are often categorized into "three nets": property, insurance, and maintenance taxes. In the US language, the lease in which these three fees are paid by the lessee is known as triple net lease , NNN Lease , or triple-N for short and sometimes written NNN .
The term "net rent" is distinguished from the term "dirty rent". In the net lease, the property owner receives a "net" lease after the fees to be paid to the lessee are paid. In the gross lease, the lessee pays the gross amount of the rent, which can be used by the homeowner to pay the fee or otherwise as the landlord feels fit. Gross lease usually has a higher rental fee to recover some of this fee in the lease line, as opposed to doing so through a clean setting.
The exact item to be paid by the lessee is usually specified in the written lease. For property rented by more than one tenant, such as a shopping center, the fees passed on to the lessee are usually assessed among tenants by size (square area) of the area occupied by each tenant. Many variations exist, with options to control cost variations and such from year to year.
Video Net lease
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There is a standard name in the commercial real estate industry for various sets of fees passed on to the lessee in the net lease.
Single net rent
In a single net lease (sometimes shortened to Net or N), the lessee or lessee is responsible for paying property taxes. This is generally uncommon.
Double net rental
In double net rent (Net-Net or NN), the lessee or lessee is responsible for property and building insurance taxes. The lessor or owner is responsible for any costs incurred for structural repairs and maintenance of public areas.
Threefold net rental
A triple net lease (triple-net or NNN) is a lease agreement in which the lessee agrees to pay all real estate taxes, builds insurance and maintenance (three "net") on the property at as well as the expected normal cost under the agreement (rent, utility, etc.). In the lease, the tenant or lessee is responsible for all costs associated with the repair and maintenance of public areas (also known as CAM - Maintenance of General Areas). CAM fees are usually negotiated up front as a dollar figure set per square foot.
This form of rent is most often used for commercial freestanding buildings. However, it has also been used in single-family residential rental housing properties.
Billable rent
A bondable lease (also called "three absolute net rent", "lease three true leasing", "hell or high water rent", or "absolute net rent") is the most extreme variation of net rent threefold, in which the tenant carries every imaginable real estate risk associated with the property. In particular, additional risks include the obligation to rebuild after the victim, regardless of the adequacy of the outcome of the insurance, and pay the rent after partial or full condemnation. This rental can not be stopped by the tenant, nor is there any reduction of rent allowed. The concept is to make the lease completely clean in all circumstances, equivalent to the obligation of the bond: then the moniker "hell-or-high water". An example of this type of lease is a leaseback arrangement in which a retailer leases back a previously owned building and continues to run the store.
Billable rent is commonly used in so-called lease agreements, where the prime mover of value is not so much real estate, but uninterrupted cash flows from the investment grade class "credit" tenants are usually assessed. Because rental bond investments offer low risk, higher levels of investment can show a recovery not only in the bond market, but also in the overall real estate market.
Land rental
"Lease land" is another variation of net rent. Under the lease of land, the landlord leases the land to the lessee which gives the lessee the opportunity to build a building. The tenant will have a rental interest on the property. Underground renters will usually pay for the same items they pay under Triple Lease Lease or Borrowable Rentals. Generally, ownership of the building will be returned to the landlord at the end of the lease.
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Economy
Typically, buildings where landlords use triple net leases (NNN) are "equity investments," rather than "cash flow investments." For example, the owner will finance a substantial portion of the purchase price on the property and pay the mortgage that is generated by the lessee's monthly rental lease. Usually there is a small amount left as a monthly profit for the owner (positive cashflow), but the greater investment return comes from the tax shield given to the owner through the use of leverage or gearing. The resulting property is then sold after the equity construction period, usually five years - a typical commercial mortgage term.
References
Source of the article : Wikipedia
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