Posted in Finance, Accounting and Economics Terms, Total Reads: 473
Definition: Double Net Lease
It is an agreement where property tax and building insurance premium both are paid by the tenant. In case of single net lease tenant only pays property taxes but in case of double net lease a tenant has to incur more expenses in form of premiums for building insurance. But here the structural maintenance cost is still paid by the landlord. So the land lord only receives additional payments (comprising of property tax and building insurance premium) along with the base rent. In commercial real estate this double net lease is mostly used.
In case of a commercial real estate the tenant pays a net lease to the owner. This not only comprises of rent but some of the other maintenance expenses of the property. All the Items that has to be paid are mentioned in the lease agreement. Double Net Lease is applied in case of commercial properties where there are multiple tenants. In case of a shopping mall individual tenants are assigned to pay taxes and the insurance premium proportionately to the area taken. Though tenants are responsible to pay premiums for building insurance and property taxes, it still routed through the commercial property owner for greater transparency.