Double Net Lease Explained: NN Lease Structure, Tenant Obligations, and CAM Comparison

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, landscaping, janitorial, management—stays with the landlord.

Double Net Lease: The Expense Allocation

Here's how operating expenses break down under a standard NN lease:

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 single distinction between NN and NNN is who pays CAM. Under NNN, tenants pay all common area maintenance expenses and face annual CAM reconciliation. Under NN, that CAM cost 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, landscaping, exterior lighting. In these cases, the distinction between NN and NNN is less significant because CAM costs are minimal.

Markets with strong tenant leverage. When tenants have negotiating power (high office vacancy, soft retail market), 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:

1. Landlord estimates annual tax and insurance costs for the coming year
2. Monthly estimates are collected from tenant
3. Actual tax bill arrives (typically Q4 for most municipalities)
4. Actual insurance renewal premium is established
5. Annual statement issued showing actual vs. estimated
6. 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

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. Labor costs for commercial maintenance (HVAC technicians, electricians, plumbers) increased 18–24% from 2022 to 2025 in most major markets. The landlord under a NN lease absorbs all of that—with no pass-through mechanism.

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's potentially $80,000–$120,000 in unrecovered costs, depending on escalation trajectory.

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.