What is a 'Single Net Lease'

A single net lease is a commercial real estate lease agreement in which the tenant agrees to pay property taxes in addition to rent. A single net lease is a form of pass through lease in which taxes associated with the property become the responsibility of the tenant instead of the landlord. The landlord is responsible for the other operating expenses involved with running the property. Single net leases are a less common form of commercial lease.

BREAKING DOWN 'Single Net Lease'

A single net lease is a type of net lease where the tenant takes on some or all of the operating cost of a building. Single net lease is sometimes confused with the concept of a net lease. Net lease refers to all the types of net leases — single net leases, double net leases and triple net leases — whereas single net leases are specifically the net lease with the tenant taking on only one operating expense, most commonly the property taxes.

Single Net Lease vs. Other Lease Types

Net leases are the other side of the coin from gross leases. In a gross lease, the tenant pays an agreed-upon amount for rent, and the landlord is responsible for everything related to the property. Most rental agreements for non-commercial properties are gross leases or a modified gross lease where the tenant is responsible for personal utilities and nothing else. As for other net leases, double net leases and triple net leases have the tenant paying two and three of the major operating expense categories, respectively. The major operating expense categories are taxes, insurance and maintenance.

The Landlord’s Perspective on a Single Net Lease

From a passive investment standpoint, a property investor would prefer a triple net lease, as there are no headaches from dealing with the property like a traditional landlord. The tenant company may not be interested in carrying all the building costs, so the double and single net leases may be a compromise between the two parties. In addition to shifting the cost burden in a single net lease, the landlord also shifts any negotiation or lobbying with local authorities on commercial property tax rates.

In theory, an absentee property owner with properties in different regions of the country could contract out maintenance, gain economies of scale by insuring across the portfolio and leave local taxation issues for the tenants to sort out. While a single net lease is more work than a triple net lease, it is still superior to a gross lease in terms of the burden it places on the property owner.

  1. Triple Net Lease (NNN)

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

    A lease is a legal document outlining the terms under which one ...
  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. Synthetic Lease

    A synthetic lease occurs when a special purpose entity established ...
  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. 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.
  3. Personal Finance

    Should You Buy or Lease a New Car?

    Deciding whether to lease or purchase a car depends on a number of factors.
  4. 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.
  5. Personal Finance

    Should You Borrow Money for a Car Purchase?

    Does it make sense to take out a loan, pay cash or lease a car?
  6. 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.
  1. 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