What is 'Double Net Lease'

A double net lease is a lease agreement in which the tenant is responsible for both property taxes and premiums for insuring the building. Unlike a single net lease, which only requires the tenant to pay property taxes, a double net lease passes more expenses along in the form of insurance payments. The landlord is still held responsible for structural maintenance expenses. Each month, the landlord receives the base rent plus the additional payments.

BREAKING DOWN 'Double Net Lease'

Double net leases are most commonly found in commercial real estate. For commercial properties with multiple tenants, such as a shopping mall, taxes and insurance fees may be assigned to the individual tenants on a proportional basis. Even if property taxes and building insurance premiums are considered the responsibility of the tenant, owners of commercial property should have property taxes passed through themselves in order to ensure that they are aware of payment issues.

Double Net Lease vs. Other Types of Net Leases

In a single net lease, the lessee or tenant is responsible for paying property taxes. Single net leases are not common

A triple net lease is a lease agreement in which the tenant or lessee agrees to pay all real estate taxes, building insurance and maintenance, in addition to normal expected costs under the agreement (rent, utilities, etc.). In such a lease, the tenant or lessee is also responsible for all costs associated with the repair and maintenance of any common area. This form of lease is common for commercial freestanding buildings, but it can also be used in single-family residential rental leases. When maintenance costs are higher than expected, tenants under triple net leases frequently attempt to get out of their leases or obtain rent concessions. For this reason, many landlords prefer bondable net leases, which is a type of triple net lease stipulating it cannot be terminated before its stated expiration date and the rent amount cannot be altered for any reason, including unexpected and significant increases in ancillary costs.

The Difference Between Gross and Net Commercial Lease

In contrast to net leases, a typical commercial gross lease, the landlord pays all of the building’s maintenance, insurance and property taxes. The costs of these services is often reflected in higher monthly rent. It’s common for the tenant to accept reasonable caps on the landlord’s exposure to the tenant’s use of these services and utilities. Often, parties will agree to a “base year” estimated expense, with the landlord billing the tenant for any overage.

RELATED TERMS
  1. Single Net Lease

    A single net lease is a lease agreement where the tenant covers ...
  2. Ground Lease

    A ground lease is an agreement that allows a tenant to develop ...
  3. Capitalized Lease Method

    A capitalized lease method is an accounting approach that posts ...
  4. Operating Lease

    An operating lease is a contract that permits use of an asset ...
  5. Bargain Purchase Option

    A bargain purchase option in a lease agreement allows the lessee ...
  6. Percentage Lease

    A percentage lease is a lease where the tenant pays a base rent ...
Related Articles
  1. Investing

    How To Rent Out Your Spare Room

    If you have extra space in your house, why not rent it out, especially during the school term, to help pay the mortgage?
  2. Personal Finance

    Is There a Way to Get Out of Your Car Lease Early?

    For those who no longer want their car for whatever reason, transferring the lease to an interested party can be a particularly appealing choice.
  3. Managing Wealth

    4 Things Landlords Aren't Allowed To Do

    Whether you're a landlord or a tenant, you need to know the rules.
  4. Managing Wealth

    Why You Should Buy A Car Instead Of Leasing

    While leasing has certain advantages, buying a car tends to save you money in the long run and offers greater flexibility.
  5. Retirement

    Retirees: Should You Buy or Lease Your Car?

    To buy or lease – that is the question. For retirees, access to safer cars, comprehensive warranties and tax deductions may drive up leasing's appeal.
  6. Investing

    5 Tips For First-Time Renters

    Knowing the main points of a lease will make sure you don't sign - and end up paying for - something you don't want.
  7. Personal Finance

    Make the Right Choice: Buying or Leasing a Car

    Ask yourself these questions before deciding between leasing or buying a car.
  8. Personal Finance

    New Wheels: Lease or Buy?

    Buying or leasing a car both have advantages and drawbacks. Find out which is best for you.
  9. Personal Finance

    The Pros and Cons of Leasing a Car

    Consider these pros and cons before deciding whether or not to lease a car.
  10. Financial Advisor

    3 Things to Consider When Renting By the Room

    Although renting by the room can increase returns on rental property, it does come with a few caveats.
RELATED FAQS
  1. Do landlords set up escrow accounts for their tenants' security deposits?

    Learn when and why landlords place rental property security deposits in separate escrow accounts to make sure the money is ... Read Answer >>
  2. Is a waiver of subrogation clause better for a tenant or a landlord?

    Find out why a waiver of subrogation clause is important to include in a lease agreement, and understand how it affects landlords ... Read Answer >>
  3. What are some types of off-balance sheet assets?

    Learn about what types of assets are often accounted for using the off-balance sheet method and why this accounting technique ... Read Answer >>
Trading Center