NNN vs. Gross vs. Modified Gross Lease

Who pays what under each lease type

Every commercial building has running costs, and the lease type says how much of them land on you. A lease is the contract that lets you use the space. The table gives the big picture. The exact split always comes from the lease you sign, so read its expense section line by line.

Notice how often the answer is "set by the lease." Two leases with the same label can split costs very differently. Treat the label as a starting point, not the answer.

Net leases: single, double and triple net

In a net lease, the tenant pays rent plus some or all of the property's expenses. Wikipedia groups the main expenses into the "three nets": property taxes, insurance and maintenance. The name of the lease tells you how many of the three you pay.

There is also a stricter version. Wikipedia calls it a bondable or absolute net lease, where the tenant carries nearly every risk tied to the property. If a lease says "absolute," slow down and have an attorney explain what you would owe if the building were damaged.

To see how net leases work for specific property types, read our retail space for lease guide and our warehouse space for lease guide.

Gross and full-service leases

In a gross lease, you pay one rent amount and the landlord pays the building's operating costs. Wikipedia lists taxes, electricity and water among the costs a landlord covers under a gross lease. In a full-service gross lease, the landlord pays those costs but builds them into the rent.

The upside is a steady, easy-to-budget payment. The trade-off is that the rent itself is higher. Wikipedia's net lease article notes that gross leases often carry higher rent to recover some of those expenses.

Gross leases can still have extras. Ask about after-hours heating and cooling, janitorial service, parking and any yearly increase tied to rising building costs. Many leases call that a base year or an expense stop. Our Las Vegas office leasing guide covers how this works in office buildings.

Modified gross leases

A modified gross lease sits in the middle: you pay rent plus some costs, and the landlord covers the rest. Wikipedia says tenants under a modified gross lease pay a proportional share of operating expenses. Which expenses are shared is up to the lease.

Because there is no fixed recipe, a modified gross lease needs the most careful reading. Make a simple chart with each cost in one column and "me" or "landlord" in the next. Then check each line against the lease wording. Common points to settle are:

• Whether you pay the electric and water bills for your own suite.
• Whether janitorial service is included or extra.
• Whether you pay any increase in taxes or insurance over a base year.
• Who repairs the heating and cooling unit that serves only your space.

Shared costs, CAM and the year-end bill

In net and modified gross leases, shared costs are often billed as an estimate each month and trued up once a year. These are called CAM charges, short for common area maintenance. In a building with several tenants, Wikipedia explains that passed-through costs are split based on the size of each tenant's space.

Here is how the yearly cycle works. The landlord sets a budget and bills you a monthly estimate. After the year ends, the landlord adds up the real costs. If you paid too little, you get a bill. If you paid too much, you get a credit. Ask for these protections in writing:

1. A clear list. Spell out what counts as a shared cost and what does not.
2. Exclusions. Leave out the landlord's loan payments, leasing costs and big capital projects, or spread those projects over their useful life.
3. A cap. Limit how much the costs you can control may rise each year.
4. A deadline. Require the year-end statement by a set date.
5. Audit rights. Keep the right to review the bills behind the statement.

Retail leases may also add rent based on sales, called percentage rent. That is a separate charge from CAM and is covered in our retail guide.

How to compare an NNN offer with a gross offer

To compare offers fairly, turn each one into a total yearly cost for the same space and the same term. A low NNN rent can cost more than a higher gross rent once the extra charges are added.

Add the lines for each year of the term and compare the totals. Then ask which costs could grow fastest. With a gross lease, the risk sits mostly with the landlord. With an NNN lease, more of it sits with you.

Local checks for Las Vegas Valley tenants

A few local steps help you check the numbers and the rules before you sign.

• Find the parcel. The Clark County Assessor's parcel search finds a parcel by address. Its form notes that the city or town shown is the legal boundary, not the mailing city. Use the parcel number to ask the landlord for the latest property tax bill if taxes pass through to you.
• Confirm the jurisdiction. The county's jurisdiction locator shows whether the City of Las Vegas, Henderson, North Las Vegas or unincorporated Clark County covers the address. That tells you who handles zoning and your license.
• Know your basic rights. Nevada's commercial landlord-tenant law, NRS Chapter 118C, applies only to commercial premises. It bars a landlord from interrupting utility service that a tenant pays the utility company for directly.
• Plan for access duties. The Justice Department's ADA Title III manual covers spaces open to the public. Write into the lease who pays for any access work in shared areas.

For the full picture of leasing in each city, including zoning, licenses and timing, read our commercial space for lease guide. Our commercial real estate hub links to every commercial topic on this site.

Help comparing lease offers

Every lease search brings its own offers and costs to weigh, so Diana quotes her leasing fee after learning about yours.

Want to know what a tenant's agent does for you? Read our office leasing agent page. To weigh firms of every kind, see our guide to comparing commercial brokers. Landlords can read about commercial property management in Las Vegas.

About Diana Valento

Diana Valento is a REALTOR® with RE/MAX Reliance, Nevada license S-0169007. She has 16 years in real estate and 500+ homes sold. That count is homes, not commercial leases. Each Office Independently Owned and Operated. See Diana's page for more.

Lease type questions, answered