Triple Net Lease Example: Annotated NNN Lease with CAM, Tax, and Audit Clauses

A triple net lease example makes the abstract mechanics concrete. Instead of describing what a CAM clause should say, let's walk through the actual provisions that matter. Each annotation explains what the clause means for the landlord's recovery and the tenant's liability.

This annotated example uses a 10,000 SF tenant in a 200,000 SF retail center, base rent at $18/SF, signing a 7-year NNN lease. The numbers are realistic for a suburban retail center in 2026.

The Lease Summary Sheet: What You'll See First

Most NNN leases open with a summary of key terms. A typical triple net lease sample summary looks like this:

That "$7.80/SF estimated NNN" is the landlord's year 1 budget divided by total building SF. It's an estimate, not a cap. Actuals will differ.

The CAM Clause: The Most Important Section

In any NNN lease example, the CAM clause is where most of the critical terms live. Here's a sample CAM clause with annotations:

Section 7.1 - CAM Expenses

"Tenant shall pay, as additional rent, Tenant's Pro-Rata Share of Common Area Maintenance Expenses ('CAM'). CAM shall include all costs and expenses incurred by Landlord in connection with the operation, maintenance, and management of the Common Areas, including without limitation: landscaping and snow removal; parking lot maintenance, resurfacing, and restriping; exterior lighting; common area janitorial services; property management fees not to exceed 4% of gross CAM collected; security; and utilities for common areas."

What this means: The 4% management fee cap matters. If the landlord collects $900,000 in annual CAM from all tenants, they can't charge more than $36,000 in management fees regardless of what they actually pay their property manager. Some landlords try to calculate the fee on gross revenues (including base rent), which inflates the base. A clause that says "4% of gross CAM collected" limits that.

"CAM shall NOT include: (a) capital expenditures, except as provided in Section 7.3; (b) costs and expenses attributable to any space leased to other tenants for their exclusive use; (c) costs associated with vacant space; (d) depreciation or amortization of any property (except as provided in Section 7.3); (e) Landlord's income taxes, franchise taxes, or transfer taxes; (f) executive salaries above the property manager level; (g) leasing commissions, legal fees, or advertising costs."

What this means: This exclusion list is the tenant's protection. Without it, a landlord could run capital costs through CAM, allocate vacant space costs to existing tenants, and include overhead expenses that have nothing to do with property operations. The complete CAM exclusion list covers everything you should push for.

Section 7.3 - Capital Expenditure Amortization

"Capital expenditures required by law or necessary to reduce CAM costs may be included in CAM expenses, amortized over the useful life of the improvement (not to exceed 15 years) with interest at 6% per annum. Tenant's share of any such amortized capital cost shall not exceed $1.00/SF per year."

What this means: The amortization provision is a compromise. Capital costs can't be expensed in full in one year. They must be spread over useful life. The $1.00/SF/year cap limits the tenant's exposure to capital items even in a heavy renovation year. Without this cap, a major parking lot replacement could spike the tenant's CAM by $3-4/SF in a single year.

The Gross-Up Provision: Often Buried, Always Important

The gross-up clause in an NNN lease adjusts variable expenses for building occupancy. Here's a sample provision:

Section 7.4 - Gross-Up of Variable Expenses

"In the event the Building is less than 95% occupied during any lease year, Landlord shall adjust those CAM expenses that vary with occupancy (the 'Variable Expenses') to reflect the amount such expenses would have been had the Building been 95% occupied. Tenant's Pro-Rata Share of Variable Expenses shall be calculated on the basis of such adjusted amount."

What this means: If the center runs at 78% occupancy and variable CAM (landscaping, snow removal, utilities) is $420,000 at that occupancy level, the landlord adjusts it:

Grossed-up variable CAM = $420,000 ÷ 0.78 × 0.95 = $511,538

The tenant's 5% pro-rata share applies to $511,538 ($25,577) rather than $420,000 ($21,000). Their bill is $4,577 higher, but it's not unfair. They'd pay $25,577 if the building were 95% occupied, which is what the clause is trying to approximate.

Use the CAM gross-up calculator to model this adjustment for different occupancy scenarios.

The Property Tax Pass-Through

Section 8.1 - Real Estate Tax Pass-Through

"Tenant shall pay Tenant's Pro-Rata Share of all real estate taxes and assessments levied on the Property during the Lease Term. Landlord shall notify Tenant of the actual tax amounts within 30 days of receipt of the tax bill. Monthly tax estimates shall be established at the beginning of each Lease Year based on the prior year's actual taxes increased by 3%, and reconciled annually to actual costs."

What this means: The 30-day notification requirement gives the tenant visibility into actual tax bills. The 3% estimate escalator is reasonable in most markets, though property tax increases can significantly exceed 3% following reassessments. Property taxes are non-controllable - if the assessor raises the value, the cost passes through with no cap protection.

In a 200,000 SF retail center with $3.50/SF in annual property taxes, the tax pool is $700,000/year. The tenant's 5% share is $35,000/year. A 15% reassessment increases this to $40,250/year, an additional $5,250 the tenant has no cap protection against.

The Reconciliation Timeline

Section 9.1 - Annual Reconciliation

"Within 180 days after the end of each Lease Year, Landlord shall deliver to Tenant a reconciliation statement setting forth actual CAM, taxes, and insurance for such year, Tenant's Pro-Rata Share thereof, and the net amount owed to Landlord or credited to Tenant. If Landlord fails to deliver such statement within 270 days after the end of the Lease Year, Landlord's right to collect any additional charges for such year shall be deemed waived."

What this means: The 180-day delivery window gives landlords six months to compile actuals - reasonable for complex multi-tenant properties. The 270-day forfeiture provision is a critical tenant protection: if the landlord misses that deadline, they forfeit the right to collect year-end true-ups. CAM reconciliation deadlines matter - missing them has real financial consequences.

For landlords managing multiple properties, tracking these deadlines across dozens of leases requires systematic processes. Missing one deadline on a large tenant can mean forfeiting a $50,000+ reconciliation balance.

The CAM Cap Provision

Section 7.5 - CAM Cap

"Notwithstanding anything to the contrary, Tenant's Controllable CAM for any Lease Year shall not increase by more than 5% per year on a cumulative basis over the prior Lease Year's Controllable CAM. 'Controllable CAM' means all CAM expenses except property taxes, insurance premiums, utilities, and snow removal."

What this means: This cap protects the tenant against runaway management fees, landscaping upgrades, and administrative cost increases. At 5% cumulative compounding, a $200,000 first-year controllable CAM base reaches $310,265 by year 10. That's manageable. Without the cap, it could be anything.

Non-controllable expenses (taxes, insurance, utilities, snow removal) remain uncapped. The landlord can't realistically cap costs driven by third parties. See the controllable vs. non-controllable expenses guide for more detail.

The Audit Rights Provision

Section 9.3 - Tenant Audit Rights

"Tenant shall have the right, not more than once per Lease Year, to audit Landlord's books and records related to CAM, taxes, and insurance for the prior Lease Year. Tenant must exercise this right within 12 months of receiving the annual reconciliation statement. If the audit reveals an overcharge exceeding 5% of Tenant's actual share, Landlord shall pay Tenant's reasonable audit costs not to exceed $5,000. Findings shall be final and binding unless disputed within 90 days of the audit report."

What this means: The 12-month audit window gives tenants a full year to review statements. The 5% threshold for cost-shifting is standard. The landlord only bears audit costs if there's a real error, not a rounding discrepancy. The $5,000 cap on reimbursable audit costs is reasonable for a single-property audit.

Tenant audit rights are only valuable if tenants actually exercise them. A tenant who never audits provides no accountability check on the landlord's calculations.

Running the Year 1 Reconciliation

At the end of year 1, the landlord compiles actual costs for this 200,000 SF center:

Gross-up adjustments (building ran at 82% occupancy, variable CAM was $380,000):

• Grossed-up variable CAM: $380,000 ÷ 0.82 × 0.95 = $440,244
• Gross-up adds $60,244 to the CAM pool ($440,244 – $380,000)
• Adjusted total expenses: $1,676,500 + $60,244 = $1,736,744

Tenant's actual share (5% of $1,736,744): $86,837 Tenant's estimated payments (5% of $1,640,000): $82,000 Year-end balance due: $4,837

After gross-up, the CAM true-up calculation shows the tenant owes an additional $4,837 for the year. That's about 5.9% of estimated NNN - consistent with a year where actual costs came in slightly above estimate and the building ran well below the 95% gross-up threshold. Well-run centers with accurate estimating often produce true-ups under 5% of estimated NNN.

What the Example Reveals

This triple net lease example in real estate demonstrates several key points:

1. The CAM clause defines almost everything: Base rent is negotiated in a paragraph; the CAM clause spans pages and determines what you actually pay.

2. Gross-up provisions add real cost: A 95% gross-up on a building at 82% occupancy adds material cost to a tenant's bill.

3. Exclusion lists have real dollar value: A capital cost of $500,000 run through CAM without amortization adds $2.50/SF to every tenant's bill in a 200,000 SF center. With proper amortization over 15 years, it's $0.17/SF. That's a $2.33/SF difference.

4. Deadline provisions have teeth: A landlord who delivers the reconciliation statement on day 280 instead of day 270 forfeits the right to collect any true-up charges.

See also: triple net lease pros and cons for the strategic considerations, what is NNN rent for the dollar components, and NNN lease definition for the structural framework.

Sources

1. ICSC - Dictionary of Shopping Center Terms
2. J.P. Morgan - What Are CAM Charges in CRE?