Commercial property ownership doesn’t have to come with the classic landlord obligations of taxes, maintenance and insurance. As some investors will tell you, success in property investment can be measured by net trips to the mailbox: if a property owner is writing more checks than she is receiving, there’s often a way to improve that situation by offloading costs onto tenants. In a nutshell, that’s what the triple-net lease does — assigns the costs of property taxes, insurance and maintenance to the tenant as enunciated in the lease agreement.
While the idea seems revolutionary to those who are first hearing it, it’s important to remember there’s no such thing as a free lunch. Triple net isn’t appropriate in every case. The fact is that the creditworthiness of tenants — related usually the degree to which they are backed with guarantees that come with national corporate presence — is the hinge point around which a triple net proposition revolves.