Triple Net Leases: How the Three Nets Are Billed and Reconciled

A triple net (NNN) lease makes the tenant pay base rent plus its share of the property’s three main costs: real estate taxes, building insurance, and common area maintenance. The landlord collects those costs as monthly estimates and reconciles them to actual spending after year end.

NNN is the default structure for retail centers, industrial buildings, and single-tenant net-leased property, and it is common in suburban office. It shifts operating risk from landlord to tenant, which is why the base rent on a NNN deal is lower than on a gross lease for the same space.

The three nets

Net	What it covers	Who sets the number
Taxes	Real estate taxes and assessments on the property	The taxing authority
Insurance	Property, liability, and often rent-loss coverage	The landlord’s insurer
CAM	Common area maintenance and operating costs	The landlord’s operations

Each net behaves differently. Taxes move in steps when a property is reassessed or sold. Insurance moves with the market and the landlord’s claims history. CAM moves with occupancy, contracts, and weather. Treating all three as one blended number hides the reasons a tenant’s charge changed, which is the first thing a tenant asks about.

How NNN billing works through the year

1. Budget. Before the year starts, the landlord budgets each net for the property.
2. Estimate. Each tenant is billed its pro-rata share of the budget, in twelve monthly installments alongside base rent.
3. Reconcile. After year end, actual costs replace the budget and the tenant’s real share is calculated.
4. True up. The difference between what the tenant paid and what it owes becomes a balance due or a credit.

A worked example for one suite:

Building rentable area        84,000 SF
Tenant rentable area           6,300 SF  (7.50% share)

Budget        taxes $210,000  insurance $63,000  CAM $294,000
NNN rate      $567,000 / 84,000 SF = $6.75 per SF per year
Tenant NNN    6,300 SF x $6.75 = $42,525 per year, $3,543.75 per month

If actual costs come in at $591,000, the tenant’s share is $44,325 and it owes a $1,800 true-up. The CAM reconciliation guide covers the CAM side of that calculation step by step.

Not every NNN lease is the same

“Triple net” describes who pays, not how the payment is calculated. Two NNN leases in the same building can produce different charges because of:

• The share denominator. Total building area, leasable area, or leased area all give different shares. See calculating pro-rata share.
• Gross-up. Variable CAM is often grossed up to a target occupancy. Taxes and insurance are not. See gross-up explained.
• Caps. A CAM cap usually limits controllable CAM only, leaving taxes and insurance uncapped.
• Admin fees. Some leases allow a management or administrative fee on CAM, some on all three nets, and some on none.
• Exclusions. Capital costs, leasing costs, and landlord disputes are typically excluded. See standard CAM exclusions.

This is why a NNN portfolio cannot be billed from a single rate per building. Each lease carries its own rules, and the reconciliation has to apply them suite by suite.

Absolute net and bondable leases

At the far end of the scale, an absolute net lease also makes the tenant responsible for structural repairs, roof replacement, and rebuilding after a casualty. These are common for single-tenant retail and are valued by investors as close to bond income. In a standard NNN lease the landlord keeps the roof and structure; in an absolute net lease it keeps almost nothing.

Where NNN billing goes wrong

• Estimates set once and never revised. A tax reassessment in March means a large true-up the next year unless estimates change mid-year.
• Taxes reconciled on the wrong year. Tax bills often arrive in arrears or straddle fiscal years. The lease says which year a bill belongs to; follow it.
• Insurance allocations without support. Blanket policies covering several properties need a documented allocation method.
• Missed reconciliation deadlines. Many leases bar charges delivered too long after year end. See the reconciliation timeline.

Model your own numbers

The NNN occupancy cost calculator shows a tenant’s full cost per square foot from base rent and the three nets. For portfolios billing NNN across many suites, NNN lease management keeps each lease’s share, caps, and exclusions with the reconciliation that uses them.