Commercial leases often include operating expenses in addition to base rent. A triple net (NNN) lease structure allocates responsibility for property taxes, insurance, and common area maintenance (CAM) to the tenant. Calculating these expenses involves determining the tenant’s proportionate share based on their occupied square footage relative to the total leasable area. For instance, a tenant occupying 1,000 square feet in a 10,000-square-foot building would be responsible for 10% of the total NNN expenses.
Understanding this allocation method offers significant advantages for both landlords and tenants. Landlords benefit from predictable income streams as operating costs are passed through to tenants. Tenants gain greater control over their expenses, potentially realizing savings through efficient management of their allocated share. Historically, this type of lease originated as a way to simplify property management for landlords while offering tenants greater transparency into operating costs.
