Double Net (NN) Lease: Reconciliation Requirements for Landlords
In a double net lease, tenants pay property taxes and insurance — landlords retain maintenance and operating expenses. Annual reconciliation applies to the tax and insurance pass-throughs.
Last updated: March 2026
Definition
A double net (NN) lease is a commercial lease where the tenant pays base rent plus property taxes and property insurance as pass-throughs, while the landlord retains responsibility for all maintenance, utilities, and other building operating expenses.
CAM Reconciliation at a Glance
| Attribute | Double Net (NN) Lease |
|---|---|
| CAM Included in Lease | Yes |
| Annual Reconciliation Required | Yes |
| Gross-Up Applicable | Not typically |
| CAM Caps Applicable | Not typically |
| Common Property Types | retail, single-tenant retail, bank branches, fast food/QSR pads, standalone commercial buildings |
Who Bears Operating Expenses
Tenant pays: base rent, property taxes (pro-rata share), property insurance (pro-rata share). Landlord pays: all maintenance, utilities, janitorial, landscaping, management fees, structural repairs, and all other operating expenses.
CAM Reconciliation Notes
NN leases require annual reconciliation for property taxes and insurance only. The landlord must reconcile actual tax and insurance costs against estimates collected. Maintenance and other operating expenses are not passed through and do not require reconciliation. This is significantly simpler than NNN reconciliation but still requires documentation of actual tax assessments and insurance premiums.
Formulas
Tenant Tax and Insurance Contribution
Tenant Share = (Actual Taxes + Actual Insurance) × (Tenant RSF / Building RSF)
| Variable | Definition |
|---|---|
| Actual Taxes | Total property tax assessed and paid for the calendar year |
| Actual Insurance | Total property insurance premiums paid for the year |
| Tenant RSF / Building RSF | Tenant's pro-rata share of the building |
Worked Example
Single-tenant retail building, 8,000 RSF. Tenant leases the entire building under a NN lease. Annual property taxes: $48,000. Annual insurance: $12,000. Tenant pro-rata share: 100%.
Tax and insurance pass-through: ($48,000 + $12,000) × 100% = $60,000.
Monthly estimates collected: $4,500/month × 12 = $54,000.
Balance due: $60,000 − $54,000 = $6,000.
Landlord Risks Under This Lease Type
Unexpected increases in maintenance costs that cannot be passed through to tenants, directly reducing NOI
Structural repairs and capital expenditures landing entirely on the landlord without contribution from tenants
Property tax increases flowing through to tenants without proper reconciliation documentation
Common Reconciliation Mistakes
- Attempting to pass through maintenance or utility costs that the lease specifies as landlord obligations
- Failing to reconcile property tax actuals when HCAD or other appraisal districts issue retroactive corrections
- Conflating NN lease obligations with NNN — attempting to charge maintenance or CAM costs the lease does not permit
Frequently Asked Questions
What is the difference between a double net and triple net lease?
In a double net (NN) lease, the tenant pays property taxes and property insurance. The landlord retains maintenance and all other operating expenses. In a triple net (NNN) lease, the tenant pays all three: property taxes, insurance, and maintenance/common area expenses. NNN leases require full CAM reconciliation. NN leases require reconciliation only for the tax and insurance pass-throughs.
Does a double net lease require gross-up?
Generally no. Property taxes and insurance are fixed expenses that do not vary with building occupancy and therefore do not require gross-up. Gross-up provisions apply to variable operating expenses (utilities, janitorial, maintenance) that would be higher at full occupancy. Since those expenses are landlord-borne under a NN lease, gross-up is typically not applicable.
Free Calculators for This Lease Type
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