The following Q&A was completed as part of our conversational Commercial Real Estate FAQ Interview Series, we hope you find it helpful:
The biggest difference between triple net and double net rests in the involvement of capital items involved in the leasing agreement itself. Many triple and double net properties involve long leases of 20 years or more, with economic responsibility changes entering in to the equation towards the end of the lease. It’s these small details that one needs to look further into when entering into this type of property or real estate investment.
Richard Wilson: If you’re talking about how it differs if someone says triple net versus double net is that usually the taxes that are left in? Is that usually the difference in shorthand, when people are talking about it? Or can it mean all different types of things?
Peter Von Der Ahe: It can mean all different types of things. Generally, what we’ll see is that the biggest difference will involve some type of capital items. So, meaning that the tenant will be responsible for most of the maintenance. However, if something happens to the roof, or something happens to the structure, there may be some type of calculation that determines the economics of when the owner would have to step in and contribute to the remedy of that. A lot of the times that this comes in, and where you have to look at the language, is toward the end of the lease term. Because off the rack, many of these properties have 20 year leases, but then in the lease clauses themselves some of the details that we’re talking about are elective to the economics of who’s responsible for what. That may change in years 18, 19, and 20, and so those are just little details that you need to explore as you enter into this investment type.
Richard: Sure, okay, great.