Triple-Net Leases: What Landlords and Tenants Should Know Before Signing

At HDC, we routinely advise both landlords and tenants on commercial real estate transactions. One of the most common structures we see is the triple-net lease (NNN) an arrangement where the tenant covers property taxes, insurance, and maintenance costs in addition to base rent.

While this model can be beneficial for both sides, it’s also where we see the most misunderstanding, risk exposure, and costly surprises. Here's what each party should know before signing.

For Landlords

1. You’re Still Responsible for What You Own
Just because a lease passes maintenance obligations to the tenant doesn’t mean you’re insulated from liability. If the HVAC fails or the roof leaks, and the tenant hasn't budgeted or addressed it properly, the value of your asset suffers and so does your rent stream.

2. Your Systems Should Be Lease-Ready
We recommend commissioning a building systems review before putting space on the market. A 15-year-old rooftop unit or aging electrical panel might work fine now, but if it fails 6 months into a lease, who pays? A well-documented baseline prevents disputes and supports fair leasing terms.

3. Budget for Capital — Even in a NNN Lease
Triple-net doesn’t mean “set it and forget it.” Deferred maintenance or system failures still require capital reserves and proactive oversight. Smart landlords maintain a rolling capex plan and audit tenant maintenance performance annually.

4. Lease Language Matters
Ambiguities in your lease — such as what defines “maintenance” versus “replacement” — can lead to litigation. Spell out responsibilities clearly, including caps on tenant obligations and requirements for regular servicing.

For Tenants

1. Know What You’re Taking On
A triple-net lease transfers more than just rent. If the HVAC system is old, the roof is due for replacement, or the plumbing is aging, those costs might fall on your shoulders. Before signing, request a building condition assessment.

2. Budget Beyond Base Rent
Tenants often underestimate total occupancy cost. Insurance premiums, rising property taxes, and unpredictable repairs can disrupt financial planning. We help tenants model realistic costs based on building age, system condition, and historical data.

3. Require Disclosures and History
Ask for documentation: age and service history of the roof, HVAC, fire suppression, and any recent capital projects. If the building has had flooding, code issues, or fire damage, that should be disclosed up front.

4. Define What You Don’t Control
You may be paying for major repairs to systems you can’t touch or inspect. Ensure the lease defines access rights, service requirements, and how “replacement” is handled. It’s not uncommon for tenants to get stuck funding major work without recourse.

How HDC Helps

We help landlords prepare their buildings for lease by documenting existing conditions, planning capital reserves, and reviewing lease structures for practicality. For tenants, we review properties before commitment, highlight hidden risks, and align budgets to the building’s real-world demands.

Whether you’re on the owner or occupant side, a triple-net lease works best when the physical condition of the building matches the financial terms on paper.