The structure of a triple net lease is designed to provide both parties with clarity and predictability. Lease terms are typically negotiated upfront, with clear definitions of the tenant's responsibilities for taxes, insurance, and maintenance. Rental payments are set for the duration of the lease, often with built-in escalators that increase the rent at predetermined intervals, either by a fixed percentage or tied to an inflation index such as the CPI.
Triple net leases are generally long-term, ranging from 10 to 20 years, and may include renewal options for tenants at the end of the initial term. Payments are made monthly or quarterly, and the lease may specify the process for handling defaults, including the landlord's legal recourse to recover unpaid amounts and regain possession of the property.
In the event of tenant bankruptcy, leases that are critical to the tenant's operations are often affirmed, and unpaid rent is treated as an administrative claim, ranking higher than unsecured obligations but below senior secured debt. This provides landlords with a degree of protection in challenging financial situations.
The triple net lease structure is particularly attractive for investors seeking stable, predictable income with minimal management responsibilities, as the tenant assumes nearly all operational and financial obligations related to the property.