NNN, modified gross or full service: what your lease makes you pay
By Francisco Williams, CCIM · CCIM · Executive Vice President, Williams Capital Advisors · CalDRE #01979442 · Updated
Short answer
In a triple-net (NNN) lease, the tenant pays base rent plus its share of property taxes, insurance and common-area maintenance (CAM). In a modified gross lease, some of those costs are in the rent. In a full-service lease, most are included. The lease type changes your real occupancy cost more than the base rent does.
Base rent is only part of it
Two spaces with the same base rent can cost very different amounts. Always ask for the estimated NNN or CAM charges per square foot and the last two years' actuals.
The three lease types
The table compares who pays what. Real leases mix and match; the clause wording controls.
| Cost | NNN | Modified gross | Full service |
|---|---|---|---|
| Base rent | Tenant | Tenant | Tenant |
| Property taxes | Tenant (share) | Often landlord up to a base year | Landlord |
| Insurance | Tenant (share) | Varies | Landlord |
| Common-area maintenance | Tenant (share) | Varies | Landlord |
| Utilities and janitorial | Tenant | Often tenant | Often landlord |
| Roof and structure | Varies; often landlord | Landlord | Landlord |
Typical patterns; the lease controls.
CAM clauses to read
What's included (management fees, capital repairs, reserves)? Is there a cap on annual CAM increases? Do you get a year-end reconciliation and audit rights? Are property tax increases after a sale passed through (see Prop 13)?
Negotiating points
Caps on controllable CAM, exclusions for capital improvements, audit rights, and a clear definition of your pro-rata share.
Next step
If you're comparing leasing with owning, run the 10-year comparison. The WCA glossary defines lease terms.
Frequently asked questions
What does NNN mean?
Triple net: the tenant pays taxes, insurance and maintenance on top of base rent.
What is CAM?
Common-area maintenance charges, shared by tenants under many leases.
Can CAM increases be capped?
Often, for controllable expenses, if negotiated.
Sources
Proposition 13 and commercial property: what changes when you buy
How a change in ownership resets the assessed value of a California commercial property and what that means for NNN tenants and buyers.
Commercial lease renewal: a 12-month negotiation timeline
When to start, what to gather and which terms to put on the table before your commercial lease expires.