Double Net Lease Explained: NN Costs, CAM, and Tenant Risk
Quick Answer
A double net (NN) lease has tenants paying base rent, property taxes, and building insurance. The landlord usually covers CAM and structural maintenance. It sits between single-net (tenant pays taxes only) and NNN (tenant pays taxes, insurance, and CAM). NN leases still appear, but NNN is more common in modern institutional leasing.
The "double" in double net lease refers to the two expense categories that pass to the tenant: property taxes and building insurance. Everything else (maintenance, repairs, groundskeeping, janitorial, management) usually stays with the landlord unless the lease says otherwise.
Double Net Lease: The Expense Allocation
Here's how operating expenses break down under a standard NN lease:
| Expense | Tenant's Obligation | Landlord's Obligation |
|---|---|---|
| Base rent | Yes | - |
| Property taxes | Yes | - |
| Building insurance | Yes | - |
| Structural maintenance | No | Yes |
| Roof repairs and replacement | No | Yes |
| HVAC maintenance | No | Yes |
| Parking lot maintenance | No | Yes |
| Groundskeeping | No | Yes |
| Janitorial (common areas) | No | Yes |
| Property management fees | No | Yes (absorbed) |
| Utilities (common areas) | No | Yes |
How the Two Pass-Through Categories Work
Property Taxes
Property taxes under a double net lease are allocated by pro-rata share in multi-tenant buildings. The landlord receives the tax bill, pays it, then invoices tenants for their proportionate share, typically as a monthly estimate with annual true-up when the actual tax bill is received.
Worked example: A 50,000 SF retail building has an annual property tax bill of $210,000 ($4.20/SF). A tenant occupying 8,500 SF has a pro-rata share of 17%: they owe $35,700/year in property taxes, billed at $2,975/month in monthly estimates.
Tax assessment appeals complicate the billing: if the landlord successfully reduces the assessed value mid-year, the tenant's share drops and any overpayment must be credited or refunded. Assessment increases, common in markets with rapid appreciation, require re-estimating the tenant's monthly obligations.
Building Insurance
Building insurance covers the structure and common areas against property damage, liability, and typically includes loss of rents coverage. The landlord places the policy and the tenant reimburses their pro-rata share.
Insurance billing under NN leases follows the same pro-rata allocation as taxes. The key issue: the landlord controls the insurance coverage decisions (policy limits, deductibles, carrier selection). The tenant pays their share but has no direct input into coverage decisions that affect their cost. Some sophisticated tenants negotiate the right to review and approve insurance decisions that materially affect their expense obligation.
Double Net vs. Triple Net: The CAM Difference
The main distinction between NN and NNN is who pays CAM. Under NNN, tenants pay common area maintenance expenses and face annual CAM reconciliation. Under NN, that CAM cost usually stays with the landlord.
What this means financially: On a 10,000 SF space where CAM runs $4.50/SF:
- NN lease: Tenant pays taxes + insurance (say $6.20/SF combined), no CAM. Annual operating expense obligation: $62,000.
- NNN lease: Tenant pays taxes + insurance + CAM ($6.20 + $4.50 = $10.70/SF). Annual operating expense obligation: $107,000.
The $45,000 annual difference is what the landlord absorbs under a NN lease, and that number grows if maintenance costs rise. See the full NNN lease vs gross lease comparison for the multi-year financial picture.
For the complete picture of all lease types, see gross lease vs net lease and commercial lease types guide.
When Double Net Leases Appear in Modern CRE
NN leases are less common than NNN in institutional commercial real estate, but they persist in specific situations:
Older regional retail properties. Leases signed in the 1990s and early 2000s at regional malls and neighborhood centers often use NN structures. As these leases renew, landlords typically push for NNN terms.
Single-tenant freestanding retail with minimal common areas. A standalone bank branch or auto parts store may have limited common area: parking, groundskeeping, exterior lighting. In these cases, the distinction between NN and NNN is smaller because CAM costs are minimal.
Markets with tenant negotiating power. When tenants have options, some accept NNN-adjacent structures but push for the landlord to retain CAM. The result can look like a double-net arrangement.
Legacy industrial leases. Some older industrial/flex leases were drafted as NN, with the industrial tenant responsible for taxes and insurance while the landlord maintained the building structure and common areas.
CAM Reconciliation Under Double Net
Standard NN leases don't require CAM reconciliation, but they do require annual tax and insurance reconciliation, which is functionally similar. The process:
- Landlord estimates annual tax and insurance costs for the coming year
- Monthly estimates are collected from tenant
- Actual tax bill arrives (typically Q4 for most municipalities)
- Actual insurance renewal premium is established
- Annual statement issued showing actual vs. estimated
- True-up collected or credited
This is simpler than full NNN reconciliation because it excludes the CAM operating expense component, but it's not zero administrative overhead.
Some double-net leases extend the pass-through to include limited operating expense items alongside taxes and insurance: utility reimbursement, pest control, or amortized capital items. When this happens, the lease is functionally a modified-double-net and requires tracking those additional categories.
Comparison: Single-Net vs Double-Net vs NNN
| Feature | Single-Net (N) | Double-Net (NN) | Triple-Net (NNN) |
|---|---|---|---|
| Tenant pays taxes | Yes | Yes | Yes |
| Tenant pays insurance | No | Yes | Yes |
| Tenant pays CAM | No | No | Yes |
| Landlord retains maintenance | Yes (all) | Yes (all CAM) | Limited/negotiated |
| CAM reconciliation | No | No (taxes/ins only) | Yes |
| Common in retail | Rare | Some regional | Dominant |
| Common in industrial | Rare | Legacy | Dominant |
For the single-net breakdown, see single-net lease explained.
What Landlords Miss When Accepting NN Terms
The biggest risk in double-net structures is maintenance cost exposure over a long lease term. The landlord under a NN lease absorbs routine maintenance inflation unless the lease includes a separate recovery clause.
On a 25,000 SF building running $4.80/SF in annual maintenance costs, a 20% cost increase adds $24,000/year to the landlord's operating expense burden with no recovery. Over a 5-year lease term, that can become $80,000-$120,000 in unrecovered costs, depending on the escalation path.
This is why most institutional property owners push for NNN on new leases and conversions to NNN at renewal. The commercial lease rent structures overview covers how this negotiation typically plays out.
For CAM tracking and reconciliation software that handles all lease types including NN tax/insurance billing, see the best CAM software 2026 guide.
Sources
- Cornell Law School Wex - Net Lease
- LegalClarity - What Is a Double Net Lease?
- Holland & Knight - Who Pays for What? Understanding Key Differences in Triple Net, Gross and Modified Gross Commercial Leases
Frequently asked questions
What is a double net lease?
A double net lease (also called an NN lease or double-net) is a commercial lease structure where the tenant pays base rent plus property taxes and building insurance. The landlord retains responsibility for structural maintenance, roof, major building systems, and all common area maintenance (CAM) costs. Double-net falls between single-net (tenant pays taxes only) and triple-net/NNN (tenant pays taxes, insurance, and all CAM). The 'double' refers to the two expense categories passed to the tenant: taxes and insurance. Double-net leases are less common than NNN in modern commercial real estate but appear in older retail and some regional properties.
What is the difference between a double net lease and a triple net lease?
The core difference is CAM: under a triple net (NNN) lease, the tenant pays common area maintenance and operating expenses in addition to taxes and insurance. Under a double net (NN) lease, the landlord usually retains CAM responsibility: parking lot maintenance, groundskeeping, janitorial, and similar operating costs stay with the landlord. This means NNN tenants face annual CAM reconciliation billing, while NN tenants' obligations are generally limited to tax and insurance bills. From a landlord perspective, NNN provides broader expense recovery; NN leaves the landlord exposed to maintenance cost increases.
Does a double net lease require CAM reconciliation?
Standard double net leases do not require CAM reconciliation because the landlord retains CAM responsibility. However, property taxes and building insurance are often reconciled annually: landlords pay the bills and allocate costs to tenants based on their pro-rata share of leasable area. Some double-net leases include certain operating expense categories (common utilities, parking lot resurfacing amortized over useful life) alongside taxes and insurance, which creates a limited reconciliation requirement. Always review the lease's specific expense pass-through section: 'double net' is a label, not a standardized term, and what's included varies by deal.
When does a double net lease make sense for landlords?
Double-net leases make sense for landlords when the tenant's credit profile or market conditions don't support full NNN terms, or when the property type has lower CAM complexity (single-tenant freestanding retail with minimal common areas). Some landlords prefer NN because retaining CAM control lets them manage property quality standards without depending on tenant maintenance practices. The tradeoff is absorbing maintenance cost inflation. For most institutional properties, NNN is preferred because it shifts more operating expense volatility to the tenant.
How are property taxes billed under a double net lease?
Under double net leases, property taxes are typically paid by the landlord to the taxing authority, then billed to the tenant as a reimbursement on either an estimated monthly basis or an annual lump sum. In multi-tenant NN buildings, each tenant's share is allocated by pro-rata share (the tenant's leasable square footage divided by total building leasable area). For single-tenant double-net leases, the tenant may pay taxes directly to the municipality, which simplifies administration. Property tax appeals create a timing issue: if the landlord successfully appeals an assessment, the credit or refund must be passed through to the tenant for any period they were billed at the higher rate.