What is a triple net lease?

Why withco employs a triple net lease structure in our small business partnership agreements. 

If you’ve ever rented commercial space before, you know that not all leases are created equal. There are several kinds of lease structures that landlords use to enter into rental agreements with tenants, and each one has its own pros and cons for both landlord and tenant. 

At withco, our lease agreements are “triple net” (or “NNN”) but they are different than most NNN leases in two majorly specific ways: 

1. withco partners have the option to purchase the property at the end of the lease
2. While paying rent on their NNN lease, withco partners earn a down payment over the course of five years to eventually purchase the property. We call this process our “lease-to-own” model. 

Below, we break down exactly what a triple net lease means, the difference between triple net leases vs. other lease structures, and why withco uses the triple net lease structure to help prepare our partners for property ownership. 

Types of lease structures

Before you can understand what a triple net lease is, it’s important to understand the different types of leases that exist out there. There are typically three types of lease structures for commercial properties: 

1. Gross Lease/Full Service Lease
   1. The tenant’s rent covers all operating expenses for the property, including taxes and utilities.
2. Net Lease
   1. Tenant pays a lower base rent while covering operating expenses like taxes and utilities. Net leases can be either “double net” or “triple net” (more on this later).  
3. Modified Gross Lease/Modified Net Lease
   1. A combination of both a gross lease and net lease, where the lease is negotiated on a case-by-case basis between the tenant and the lessor. 

Definition of a triple net lease

At the most basic level, a triple net lease is a type of net lease wherein the tenant is responsible for covering three additional operating expenses in exchange for a lower base rent: property taxes, utilities, and maintenance expenses. 

Triple and double net leases (where the tenant pays property taxes and utilities in addition to rent) are fairly common in the commercial real estate world. This is why small business owners who already operate with NNN leases make great future withco partners and are much more likely to qualify. 

Meet some of withco’s amazing small business partners. 

Benefits of triple net lease

Triple net leases might seem like a lot of expenses to cover, but there are many reasons it has become the near universal standard for commercial real estate leases. 

1. Lower base rent. At the end of the day, running a business is all about the bottom line, and lower rent means lower expenses overall. 
2. More control over costs. Instead of paying a flat fee to cover all of a building’s operating expenses as the lessee, the tenant can more easily control costs by paying expenses like utilities directly. For example: Want to cut costs in the summer months? Monitoring and limiting A/C use will directly result in a lower bill. On the flip side, if your landlord is trying to keep costs down, they may limit your use of facility amenities. But a NNN lease puts you in control. 
3. Prepares you for property ownership. Operating under a NNN lease feels very similar to what it is like to own your property in that you are responsible for all of the building’s expenses. The problem with most NNN leases is that a small business tenant lays no claim to the property, and their landlord reaps all the benefits of commercial property ownership at the tenant’s expense. 

withco’s triple net lease-to-own model

This is where withco makes a huge difference in the triple net lease structure. Instead of simply paying all the expenses that a property owner would pay with no financial benefit, small business owners can now earn their way to property ownership with our lease-to-own model. 

On a withco triple net lease, our partners earn a down payment credit over the course of five years and have the option to purchase the property at the end of the lease term. If you’re already paying into a NNN lease, a withco partnership is a no-brainer—you could be turning one of your largest operating expenses into a real investment, and reap the financial benefits of property ownership in as little as five years. 

A step-by-step guide to withco’s lease-to-own model. 

If you’re not on a triple net lease, we’ll walk you through the exact costs to expect—chances are, you’re paying a premium on rent to cover these costs already. We’ll never stick you with costs you can’t afford.