Commercial Net Lease Agreement

A commercial net lease agreement is a rental contract for a property where the tenant agrees to pay additional costs. These net expenses typically include property taxes, insurance, and maintenance and operating costs. As a result, the landlord receives net income from the lease, as the tenant is responsible for those expenses.

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Last updated January 2nd, 2025

A commercial net lease agreement is a rental contract for a property where the tenant agrees to pay additional costs. These net expenses typically include property taxes, insurance, and maintenance and operating costs. As a result, the landlord receives net income from the lease, as the tenant is responsible for those expenses.

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Between May 2022 and May 2024, available net lease properties grew from $9.05 billion to $24.3 billion. This is a 168% increase in just 2 years.[1]

The 3 Types of Commercial Net Leases

  • Triple Net Lease (NNN): This is the most common type of lease. The tenant pays for the property taxes, insurance, and maintenance in addition to the base rent.
  • Double Net Lease (NN): The tenant pays property taxes and insurance, and the landlord pays the maintenance costs.
  • Single Net Lease (N): The tenant pays property taxes, while the landlord is responsible for insurance and maintenance.

Key Things to Know About Commercial Net Lease Agreements

  • Fixed Monthly Rent: The tenant pays a set base rate that may be lower than a commercial gross lease agreement 
  • Property Costs: The lessee is responsible for paying additional net expense(s), as defined by the net lease agreement type.
  • Fluctuating Expenses: The renter is exposed to unexpected expenses, such as rising taxes or maintenance.
  • Landlord Obligations: The property owner transfers property expenses that reduce their financial risk.

Total Monthly Rent = Base Rent + Net Expense Estimate

At year-end, if the actual expense differs from the estimates, the landlord reconciles and adjusts payments accordingly.

What is Common Area Maintenance (CAM)? 

CAM charges cover the costs of maintaining shared spaces within a property, such as:

  • Parking lots
  • landscpaping and groundskeeping
  • elevators and lobbies
  • Security
  • Snow removal and trash collection
  • lighting and utilities in share spaces

Tenants may request a cap on annual increases in CAM charges, such as a fixed percentage (e.g. 3-5%) or a specific dollar amount.

How is CAM Calculated for Multi-Tenant Properties? 

CAM expenses are divided equally among tenants based on their pro-rata, or proportion of space the tenant occupies, in the building.

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