The amount of minimum stated rent. This is the amount of money that is applied to owner’s mortgage, capital improvements, and profit.
A type of rent calculation where the rent includes the base rent and all expenses. Expense increases each year of the lease will be passed on to tenant in the form of Expense Pass Throughs.
Expense Pass Throughs
Expenses that the tenant is obligated to pay according to the terms of the lease. It is customary for tenants to pay their pro-rata share of expense increases. Expense pass throughs are usually handled like the escrow account on a home loan, with the tenant paying an estimated 1/12 each month with an annual reconciliation.
This is a method of implementing expense pass throughs. The tenant pays expenses over a specified amount per square foot. For example, the Expense Stop may be $9.00 per square foot. If expenses are $9.50 per square foot, then the tenant is responsible for paying $.50 per square foot. Often the first year (base year) is used to set the expense stop amount to be used to calculate pass throughs for the following years.
Triple Net Lease
A type of rent calculation where the rent cost is split up into a Base Rent amount and a separate expense amount call Triple Net (NNN).
Triple Net or “NNN”
Typically, expenses are placed in three categories: taxes, insurance, and operating expenses. The term “triple net”, which is also written “NNN”, means that the tenant pays all expenses as a separate charge. (It is implied that each “N” refers to one of each of the categories.) Triple net is a shorthand real estate way of saying that the tenant pays base rent plus 100% of all expenses.
Gross Lease vs. Triple Net Lease
These are two ways that owners handle their books. Both basically have the same total cost to the tenant. The only major difference is that a Gross lease has a guaranteed rate for the first year and a Triple Net lease uses an estimate for the first year expenses, which can be higher or lower than budgeted.