Certified Residential Appraiser Practice Exam

What is a Triple Net Lease characterized by?

1. The landlord pays all expenses

2. The tenant pays all operating expenses

3. Costs are split between tenant and landlord

4. The rent is variable based on sales

The correct answer is: The tenant pays all operating expenses

A Triple Net Lease is characterized by the tenant assuming responsibility for all operating expenses associated with the property. This includes costs such as property taxes, insurance, and maintenance. In this arrangement, the landlord typically only collects rent and has minimal responsibilities for managing the operational costs of the property. This type of lease is common in commercial real estate, as it allows landlords to have a predictable income stream without the burden of managing property expenses. The tenant's obligation to cover these expenses means that they have a vested interest in the overall upkeep and financial health of the property, which can encourage them to perform maintenance and manage costs effectively. This arrangement is beneficial for landlords, as it reduces their financial risk and workload while potentially leading to a higher net income from the property.