Triple-net lease (NNN)

NNN leases pass through three categories of expense. The tenant pays base rent plus an estimated monthly NNN charge, reconciled annually against actual costs, with the difference billed or credited.

A retail tenant pays $20/SF base rent plus $6/SF NNN, reconciled at year-end against the actual expense pool.

NNN shifts cost risk to the tenant, which is what makes the income stream attractive — but only if the pass-through is actually administered. An unreconciled NNN lease quietly becomes a gross lease at the landlord's expense.

Maintain an expense pool that matches the lease's inclusion and exclusion language exactly. Reconcile on the same date every year, inside the lease's deadline, and send the supporting detail with the statement. Track the tenant's insurance certificate alongside it.

Passing through excluded capital items, missing the reconciliation deadline the lease itself imposes, and applying one property's expense pool logic to a lease that was negotiated differently.