In the commercial context, a simple lease is an agreement that gives a tenant the right to use a property in exchange for rent payments. Many commercial leases are not this basic, however. Instead, the agreement is likely to be a net lease.
A net lease is just a real estate lease that requires the tenant to pay certain expenses in addition to regular rent payments. With commercial property, single, double and triple net leases are possible.
Single net leases
Less common in the commercial sector than the other two, a single net lease typically requires the tenant to pay rent plus property tax. This type of lease holds the landlord responsible for essentially everything else, including insurance, utilities, repairs and maintenance.
Double net leases
Double net leases require tenants to pay rent, property taxes and insurance. These leases usually still hold landlords responsible for utilities, maintenance and repairs.
Double net leases are popular with commercial landlords, as insurance premiums often vary from tenant to tenant. For example, in a strip mall, a tenant with a large space may owe considerably more in insurance than one with a smaller footprint.
Triple net leases
Triple net leases are the most common and also the least risky for commercial landlords. With this type of lease, tenants pay rent, property tax, insurance and maintenance costs. They may also be on the hook for some major property repairs.
Regardless of the type of net lease, if a lease requires a tenant to cover certain expenses, landlords usually act as collectors. That is because landlords have the ultimate responsibility to pay taxes, insurance and other costs, they often require tenants to deliver funds to them instead of allowing them to make direct payments.