Understanding Commercial Lease Types
A Guide to How Lease Structures Impact Your Role as an Investor
The Foundation of Your Investment
The **lease agreement** is the engine of a commercial real estate investment, defining the responsibilities of both the landlord and the tenant. Understanding the different lease structures is critical, as they directly impact your income, expenses, and level of **management involvement**. This guide breaks down the most common lease types to help you make an informed decision.
Compare Lease Structures
Gross Lease
Investor (Landlord) Responsibility
Pays for all major operating expenses, including **property taxes**, **insurance**, and **common area maintenance (CAM)**.
Tenant Responsibility
Pays a single, flat rental rate. The landlord handles all other property-related costs.
Investor Profile
Best for investors who want more **control over the property's maintenance and budget**, and are prepared for **hands-on management**.
Net Lease (N)
Investor (Landlord) Responsibility
Pays for **insurance** and **common area maintenance (CAM)**.
Tenant Responsibility
Pays a base rent plus their pro-rata share of the **property taxes**.
Investor Profile
A middle-ground approach that offloads some risk to the tenant while the landlord retains control over maintenance and insurance.
Double Net Lease (NN)
Investor (Landlord) Responsibility
Typically only responsible for **structural repairs** and **common area maintenance (CAM)**.
Tenant Responsibility
Pays a base rent plus their pro-rata share of **property taxes** and **insurance**.
Investor Profile
Suits investors who want to minimize their exposure to fluctuating tax and insurance costs.
Triple Net Lease (NNN)
Investor (Landlord) Responsibility
Generally has **no responsibilities for operating expenses**, aside from major structural repairs.
Tenant Responsibility
Pays for all three "nets": **property taxes, insurance, and all common area maintenance (CAM)**.
Investor Profile
Ideal for **passive investors** seeking a **hands-off asset** with a predictable, long-term income stream.