Absolute Net Lease

Hello landlords and tenants, I’m here to talk about true meaning of an “absolute net lease” in commercial real estate leasing and why should care about this definition in your lease.  I’m Jenna Zebrowski, the Attorney behind the LawByJZ.com.

An absolute net lease means that the tenant is going to pay all of the expenses for the property under the terms of the lease: the taxes, the insurance and operating costs. If there are any capital expenses, those will be the tenant’s responsibility as well.  Those costs are in addition to the base rent. It’s more inclusive than a triple net lease and it’s basically a way for the landlord to shift some of the financial responsibility and costs of ownership onto the tenant.

It could be a good fit for a ground lease situation, perhaps, so that the invested costs can be recovered, but it’s going to be specific to the tenant situation.

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Commercial Real Estate Case Study

An Absolute Net Lease Commercial Real Estate Lease Agreement Can Help Your Business Thrive

Rodney was opening his first location for his restaurant, which he hoped would finance future expansions. He found the perfect location with a building that he could remodel exactly to his specifications, that was in the right location with the right zoning, but the landlord wanted an absolute net lease.  Rodney had always planned on, and budgeted for, a triple net lease, so he wasn’t sure if an absolute net lease was the right one for his business. The rent was really low, though, so Rodney wanted to know if this commercial real estate lease agreement was the right one for his particular situation.

Rodney needed to understand what an absolute net lease is and what that would mean for him and his business budget.  He wanted to know exactly what he was getting into and what that would mean for his specific situation.  Rodney wanted to operate his business and not have to worry about having the right information to make the right decision.

The absolute net leases shifts the financial responsibilities to the tenant, including taxes, insurance, and capital expenses, as well as utilities, landscaping, and all of the other costs associated with not just occupying but owning commercial real estate. A triple net lease means that the Rodney would pay rent and his share of the taxes, insurance and operating expenses, but the landlord would be responsible for the ownership costs, like capital expenses, and the landlord would have more control over Rodney’s building.

An absolute net lease was a great fit for Rodney.  He wanted to take care of HIS building and not to have to share that responsibility with the landlord.  The rent was low enough that the landlord that landlord could get the income it needed and not have to take any other action regarding the property. This was exactly what Rodney wanted!  Rodney is glad he spent a little bit of time and money to understand what exactly an absolute net lease is and what that means to his specific business and its operations.  He was able to afford the exact space he needed, and be in charge of all of its aspects, without getting permission from a landlord before protesting property taxes, remodeling the building, or deciding what kind of insurance he needed to have.