Commercial Lease Types Explained
The five main commercial lease structures — what each one means, who pays what, and which terms to negotiate before you sign. The lease type determines whether you pay taxes, insurance, and maintenance on top of base rent.
| Cost | Full-Service (Gross) | Modified Gross | NNN (Triple Net) | NN (Double Net) | N (Single Net) |
|---|---|---|---|---|---|
| Base rent | Tenant | Tenant | Tenant | Tenant | Tenant |
| Property taxes | Landlord | Sometimes | Tenant | Tenant | Tenant |
| Building insurance | Landlord | Sometimes | Tenant | Tenant | Landlord |
| CAM / maintenance | Landlord | Sometimes | Tenant | Landlord | Landlord |
| Utilities | Landlord | Usually | Tenant | Tenant | Tenant |
| Janitorial | Landlord | Usually | Tenant | Tenant | Tenant |
Tenant = tenant pays. Landlord = landlord pays. "Sometimes" / "Usually" = negotiated case by case. Modified Gross varies by deal — always read the specific expense allocation in your lease.
Full-Service Gross Lease
Tenant pays base rent. Landlord pays everything else.
In a full-service gross lease, your monthly check to the landlord is your total occupancy cost. The landlord pays property taxes, building insurance, maintenance, utilities, and janitorial — all of it. You pay one fixed number.
Full-service leases are most common in multi-tenant office buildings, especially Class A and B. The simplicity is real: budgeting is straightforward and there are no year-end CAM reconciliation surprises. The tradeoff is that the base rent is higher than comparable NNN spaces — the landlord has already priced in their operating cost exposure.
- Base rent
- Property taxes
- Building insurance
- CAM / maintenance
- Utilities
- Janitorial
Best for predictability. If you want to know exactly what you owe each month without tracking building operating costs, this is the cleanest structure. Typical in office; rare in retail.
Modified Gross Lease
Some costs split by negotiation. Terms vary by deal.
A modified gross lease falls between full-service and NNN. The tenant and landlord split operating expenses, but the specific split is negotiated — there is no standard allocation. One modified gross lease might include utilities; another might not.
The most important thing to understand about modified gross leases: the label tells you almost nothing. You must read the specific expense allocation in your lease to know what you actually owe. Common structures include the tenant paying utilities and janitorial while the landlord covers taxes, insurance, and CAM — but any variation is possible. Modified gross terms are often found in flex space, smaller office buildings, and suburban retail.
- Base rent
- Some operating expenses (negotiated — read the lease)
- Remaining operating expenses (as negotiated)
Acceptable, but read the allocation carefully. "Modified gross" is a description of a structure, not a defined standard. Get the expense split in writing before you negotiate rent. The two costs that matter most: who pays property taxes, and whether CAM is capped.
Triple Net Lease (NNN)
Tenant pays base rent plus taxes, insurance, and CAM.
In a triple net lease, the tenant pays base rent plus the three "nets": property taxes, building insurance, and common area maintenance (CAM). These are passed through as additional monthly charges on top of base rent, and they can grow significantly over the lease term.
NNN is the dominant structure in retail and single-tenant commercial properties. The base rent in an NNN lease will be lower than an equivalent full-service space — sometimes substantially lower — but the total occupancy cost once you add the three nets is often comparable or higher. CAM charges typically run $3–15/sqft depending on property type and market, and without a cap they can grow 6–11% per year. In year 5 of an uncapped NNN lease, you may be paying significantly more than you budgeted in year 1.
- Base rent
- Property taxes (pro-rata share)
- Building insurance (pro-rata share)
- CAM — maintenance, repairs, landscaping, management fees (pro-rata share)
- Structural repairs (unless excluded by lease language)
Requires careful negotiation. The key protections to get in writing: a 5% annual cap on controllable operating expenses, exclusion of capital expenditures from CAM, audit rights, and an administrative fee cap (landlords sometimes charge 10–15% of total CAM as a management fee). Without a CAM cap, your total cost is effectively unknown for the full lease term.
Double Net Lease (NN)
Tenant pays base rent plus taxes and insurance. Landlord handles maintenance.
In a double net lease, the tenant pays base rent, property taxes, and building insurance. The landlord is responsible for structural repairs and maintenance. CAM is not passed through to the tenant.
Double net leases are less common than NNN or full-service but appear in some retail and industrial properties. The main advantage over NNN: maintenance and repair costs stay with the landlord, which limits your exposure to unexpected property issues. Property tax and insurance passthroughs can still fluctuate, so verify whether those costs are capped and how your pro-rata share is calculated.
- Base rent
- Property taxes (pro-rata share)
- Building insurance (pro-rata share)
- CAM / building maintenance
- Structural repairs
Better than NNN on the maintenance side. Still verify how property taxes and insurance are calculated and allocated. Ask whether your share is based on rentable square footage or a fixed percentage, and whether there is a reconciliation process at year end.
Single Net Lease (N)
Tenant pays base rent and property taxes. Landlord covers everything else.
In a single net lease, the tenant pays base rent plus property taxes. The landlord covers insurance, maintenance, and repairs. This structure is relatively uncommon in commercial real estate.
Single net leases are rare in practice — most landlords prefer NNN or at least NN to transfer more cost exposure to the tenant. When they do appear, it is often in ground leases or specialty properties. The tenant's exposure is limited to base rent and property tax fluctuations, which are generally more predictable than maintenance costs.
- Base rent
- Property taxes (pro-rata share)
- Building insurance
- CAM / maintenance
- Structural repairs
Favorable structure for tenants, but verify that the lease is actually structured as described. "Net" is sometimes used loosely in commercial real estate to mean any lease with some passthrough expenses. Read the specific expense allocation, not just the label.
From a tenant standpoint, the lease type determines how predictable your total occupancy cost will be. Full-service gross leases are the most predictable — one number, no surprises. NNN leases are the least predictable without a CAM cap, because operating expenses can grow faster than base rent.
In practice, lease type is often dictated by property type and market convention. Retail properties are predominantly NNN. Class A office is usually full-service. Industrial and flex space tends to be modified gross. You often cannot choose the lease type — but you can negotiate the terms within it.
The three most important things to negotiate regardless of lease type:
- A cap on controllable operating expense increases — 5% per year is standard. Without it, your NNN or MG costs are effectively uncapped.
- An audit right — the right to review the landlord's operating expense records once per year. Standard language in most markets.
- Exclusions from CAM — capital expenditures, leasing commissions, and management fees above a stated percentage should be excluded from the expenses passed through to tenants.
If you are reviewing a lease and want to check whether specific expense-passthrough language is tenant-favorable, the free Clause Checker will give you an instant assessment.