A net lease is a lease that shifts some or all of a property’s operating expenses — real estate taxes, insurance, maintenance — from the landlord to the tenant, “net” of those costs to the owner. The category runs a spectrum from single net to absolute net, and where a lease sits on it determines whose income the property’s expense surprises come out of.
The spectrum
Lease structures order by how many expense categories the tenant assumes:
- Gross lease — the landlord pays operating expenses from the rent (the opposite pole; office markets’ historical convention, often with expense-stop hybrids).
- Single net (N) — tenant adds property taxes.
- Double net (NN) — tenant adds taxes and insurance; landlord keeps structural and maintenance obligations.
- Triple net (NNN) — tenant adds maintenance too, leaving the landlord largely passive; the standard of single-tenant retail and industrial.
- Absolute net — tenant bears everything including roof and structure; the purest bond-like form.
The economic logic: every expense category shifted to the tenant makes the landlord’s income more predictable and the lease more debt-like — which is why the cap rates on net-leased assets compress toward credit pricing as the structure tightens and the WALT lengthens, and why “net lease” functions as an asset class label, not just a contract term. The investable universe spans dedicated net-lease REITs (public and non-traded), DSTs built for 1031 investors, sale-leaseback programs manufacturing the product from corporate real estate, and direct single-tenant ownership.
Reading a “net lease” deal precisely: the label is a starting point, not a specification — actual expense allocation lives in the lease’s reimbursement and repair clauses (double-net deals marketed with triple-net vocabulary are a recurring diligence catch), landlord capital obligations (roof/structure carve-outs) can meaningfully dent “passive” income, and escalation structure plus tenant credit do the pricing work the nets only frame. The deep dive on the dominant form — economics, risks, and the dark-store problem — lives on the Triple Net Lease page.
FAQ
What is a net lease in simple terms?
A lease where the tenant pays some or all of the property’s expenses on top of rent — taxes, insurance, maintenance — instead of the landlord absorbing them.
What do single, double, and triple net mean?
The count of expense categories the tenant assumes: taxes (single); plus insurance (double); plus maintenance (triple). More nets, more landlord passivity.
Why do investors pay premium prices for net-leased properties?
Predictable, expense-insulated income over long terms behaves like a bond with real estate attached — and the market prices that predictability with lower cap rates.
Related terms
Triple Net Lease (NNN) · Sale-Leaseback · WALT · Cap Rate · Ground Lease
Educational content only; not investment, tax, or legal advice. Consult qualified professionals regarding your specific circumstances.
