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. Lease

    A lease is a legal document outlining the terms under which one ...
  2. Triple Net Lease (NNN)

    A triple net lease assigns sole responsibility to the tenant ...
  3. Graduated Lease

    Graduated lease refers to an agreement under which a tenant and ...
  4. Capitalized Lease Method

    A capitalized lease method is an accounting approach that posts ...
  5. Shell Lease

    A shell lease is a commercial lease for an unfinished interior ...
  6. True Lease

    A true lease is a type of multi-year lease where the lessor bears ...
Related Articles
  1. Personal Finance

    The Pros and Cons of Leasing a Car

    Consider these pros and cons before deciding whether or not to lease a car.
  2. Investing

    How to Get More Cash from the Sale of a Property

    Using a 1031 exchange in combination with a credit tenant loan can result in more cash in the bank from the sale of a property.
  3. Investing

    Tips for prospective landlords

    Investing in rental property can generate serious income, but there's more to it than collecting rent. Check out all the pros and cons before you invest in the rental property.
  4. Managing Wealth

    4 Ways to Get the Best Deal on a Car Lease

    Car buyers typically negotiate when purchasing a vehicle, but many don't negotiate when leasing a car. There are several ways to save if you ask.
  5. Investing

    Leasing to Section 8 Tenants?

    Real estate investors and landlords: It's worthwhile to investigate the section 8 market. Learn about the pros and cons of leasing to section 8 tenants.
  6. Personal Finance

    Should You Buy or Lease a New Car?

    Deciding whether to lease or purchase a car depends on a number of factors.
  7. Investing

    5 Tips For Finding A Good Landlord

    A bad landlord can ruin the best rental property. Find out how to find an honest landlord that you can rely on.
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 >>
Trading Center