What is a triple net lease?

triple net lease by Jan Jablunka
What is a triple net lease and other advice for searching for an office.

A triple net lease is a very common form of lease in commercial business properties. Triple net leases are most popular in businesses that have multiple tenants. For example, a building with many floors and different units would typically be a triple net property.

So what exactly is “triple net” leasing?

A triple net lease is the structure of the agreement between a landlord and the tenant. As part of the rent, the tenant agrees to pay the:

  1. Property Expenses
  2. Insurance
  3. Maintenance

Rent is the net of all of these expenses. Often times the rent starts out lower, but then the rent fluctuates based on these “triple net” fluctuations.

For example, rent might be $500 per month, but then based on taxes, electricity, insurance, and maintenance you might pay $325 the next month and $295 the next and the $421 in the winter. The triple net lease makes it very hard to plan ahead as a business owner

Alternatives to triple net leasing

Since I am writing for counselors in private practice, not for landlords, let’s talk about why a triple net lease is usually not a good idea:

  • You can’t count on your rent being the same.
  • A triple net lease fluctuates each month
  • If you’re shooting to have your rent be 20-25% of income, it’s really hard to manage
  • Unless you are in a high rent area that is very landlord friendly, there are many alternatives to triple net leasing.
  • Make sure you read the article How to find a counseling office.

Non-triple net models

I go in-depth on how to negotiate rent, but here are a few alternatives to triple net leasing.

  • Ask for a triple net limit: Ask for a clear bottom line or upper limit. You may have to pay a little bit more or have a longer lease, but you’ll have a specific money amount locked in. Since prices go up over time, longer leases will actually guarantee that the price does not go up.
  • Ask to pay a percentage: It is not unreal to ask to pay a percentage of your income. Especially in areas with loads of property, you can negotiate to pay a percent of your income. Often a landlord then wants you to be flexible. If they find a full-paying tenant you may have to move out.
  • Lease from another counselor: Think about it, if a counselor sees 20 clients per week in private practice that leaves a tons of hours left over. Imagine all the private practice session opportunities: Every Monday through Friday from 7:00 am-8:00 pm, that’s 13 hours per day. Broken into 45 minute sessions this is 17 sessions!

 

private practice consultant headshot

Joseph R. Sanok, MA, LLP, LPC, NCC

Joe Sanok is a private practice business consultant and counselor that helps small businesses and counselors in private practice to increase revenue and have more fun! He helps owners with website design, vision, growth, and using their time to create income through being a private practice consultant.

Joe was frustrated with his lack of business and marketing skills when he left graduate school. He loved helping people through counseling, but felt that often people couldn’t find him. Over the past few years he has grown his skills, income, and ability to lead others, while still maintaining an active private practice in Traverse City, MI.

Photo by Jan Jablunka

 

1 Comment

Leave a Reply