Triple Net (NNN) Leases:

Why $5,000 Rent Is Really $6,800

The number you negotiated isn't the number you'll pay

A client comes in pleased. They talked the landlord down from $5,500 to $5,000 a month.

Then we read the lease. It's triple net. Base rent is $5,000, and on top of that the tenant pays a pro-rata share of property taxes, building insurance, and common area maintenance. Add it up: roughly $1,800 a month.

Real occupancy cost: $6,800. They negotiated $500 off a number that was never the whole number.

This isn't a trick. NNN structures are completely standard in commercial real estate, and they can be perfectly reasonable. The problem is arithmetic — tenants budget from base rent, and base rent is often only 70–75% of the actual cost.

What "triple net" actually means

Commercial leases sit on a spectrum. On a gross lease, you pay rent and the landlord absorbs the building's operating costs. On a triple net lease, you pay rent plus three categories of cost — the three "nets":

1.Property taxes — your proportionate share of the building's real estate taxes

2.Building insurance — your share of the landlord's property insurance premiums

3.Maintenance and operating expenses — often called CAM (common area maintenance): cleaning, landscaping, snow removal, lighting, security, repairs to shared areas, and sometimes management fees

Your share is usually calculated by dividing your square footage by the building's total rentable square footage. If you occupy 1,500 of 15,000 square feet, you pay 10% of these costs.

That is the whole concept. The risk isn't the structure — it's that these costs move, and mostly they move up, and in most NNN leases they move at the landlord's discretion, not yours.

Where NNN leases get expensive

Property tax reassessment. New York property taxes rise, and after a building sells or is substantially improved it can be reassessed sharply higher. In a NNN lease, that increase flows straight to you. A tenant paying $600/month in tax pass-throughs can find themselves at $800 or more after a reassessment they had no part in.

Capital improvements dressed as operating expenses. This is the big one. If the lease permits the landlord to pass through "capital improvements" or amortize them into CAM, a new roof, a new elevator, or a facade project can land in your monthly bill. These are ownership costs. They belong to the owner.

No control, full cost. The landlord chooses the contractors, the service levels, and the vendors. You pay the invoice. A landlord with no cost exposure has no reason to shop carefully.

Repair ambiguity. Who replaces the rooftop HVAC unit — $15,000 to $40,000? Who pays for the roof? For structural repair? Many leases are vague enough that the answer becomes whoever has less patience for a dispute.

Annual creep. Even with base rent locked, taxes, insurance, and CAM all rise. Your total cost can climb 4–6% a year while your "rent" appears flat.

The six questions to ask before you sign

Bring these to the landlord or broker in writing. The answers tell you more than the base rent does.

1. What did the actual pass-throughs total in each of the last three years?

Ask for real figures, not estimates. Three years shows you the trend. An "estimated $X per square foot" without history is a projection, not a fact.

2. Exactly what's included in CAM — and what's excluded?

Push for a written exclusion list: capital improvements, structural repairs, roof replacement, the landlord's own financing and legal costs, leasing commissions, costs reimbursed by insurance, and expenses attributable to vacant space.

3. Is there a cap on annual increases?

Ask for a ceiling on controllable expenses — commonly 3–5% per year, or a cumulative cap over the term. Taxes and insurance are typically excluded from caps because the landlord doesn't control them; everything else is negotiable.

4. Can the landlord pass through capital improvements?

Try to exclude them. If the landlord won't, negotiate that any improvement be amortized over its useful life, with only the portion falling inside your lease term charged to you.

5. Do I have audit rights?

You should be able to review the landlord's expense records — with a stated deadline, and ideally with a provision that the landlord pays audit costs if an error above a threshold (say 3–5%) is found. Without audit rights, you're paying invoices you're not allowed to see.

6. Which repairs stay with the landlord?

Get roof, foundation, structure, and base building systems named in writing as the landlord's responsibility. "Landlord shall maintain the structure" is not enough — name the components.

How to compare spaces honestly

Convert everything to total annual cost per square foot.

A gross lease at $46/SF and a NNN lease at $32/SF plus $14/SF in pass-throughs are the same $46/SF — except the NNN lease also carries the risk of those pass-throughs rising. Once you compare on that basis, decisions get much clearer.

The point isn't to avoid NNN leases

Well-drafted NNN leases work fine, and in much of the New York market you won't get a choice. The goal is to know your real number, cap what can be capped, exclude what should be excluded, and keep the right to check the math.

All of which has to happen before signature. After you sign, the CAM statement arrives and you pay it.

Know your real occupancy cost before you commit.

Zhou Law, P.C. reviews commercial leases for a flat fee starting at $699, including the pass-through and CAM provisions most tenants skip. You get a redlined lease and written attorney comments in 2–3 business days. Negotiation packages start at $1,099.

Call +1 (212) 201-6134 or book a free 30-minute consultation.

This article is general information about New York law, not legal advice, and does not create an attorney-client relationship. Figures are illustrative examples.