Types and Definition of Net Leases

A net lease applies to commercial real estate. It compels a tenant to give payment, in addition to rent, for a particular or all expenses on the property which is typically paid by the owner of the property, also known as “landlord” or “lessor.” These expenses refer to real estate taxes, maintenance and repair, insurance, utilities, among others.

Types of net leases

1. Single net lease

In a single net lease, otherwise called as Net or N, the lessee or tenant has to pay for property taxes, together with base rent. This is not a very common form of lease, unlike double- and triple-net leases.

2. Triple net lease

A triple net lease, also known as Net-Net-Net or NNN, is a lease arrangement on a property where in the tenant or lessee has to pay all real estate taxes, building insurance, and maintenance on the property as well as normal fees such as rent and others. In this type of lease, the tenant or lessee is also responsible for any expenses for the repair and maintenance of the property.

This type of lease is most commonly used for freestanding buildings.

2. Double net lease

In a double net lease or Net-Net or NN, the lessee or tenant has to pay for real estate taxes as well as building insurance. On the other hand, expenses incurred for structural repairs and common area maintenance is covered by the lessor or landlord.

3. Bondable lease

A bondable lease (absolute triple net lease or a "hell-or-high-water lease) is the most radical adaptation of a triple net lease wherein the tenant is responsible for every conceivable real estate risk related to the property. These risks include responsibility to reconstruct after a casualty despite the sufficiency of the proceeds provided by the insurance, and to pay rent even after part or all of the property will be taken into public use. The tenant does not have the power to terminate these leases, moreover rent reductions are not allowed. The concept is to make the terms of the rent similar to a bond.

This form of lease is normally applied in purported "credit tenant lease" transactions, in which the continuous cash flow from the typically investment-grade rated "credit" tenant is the principal determiner of value and not so much the real estate.

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Organizing a Real Estate Development Company

Real estate development is a business that is comprised of several activities ranging from restoration and re – lease of present structures to the purchase of land and the sale of developed parcels. Developers coordinate activities and convert written ideas into real property.

There is a distinction between “real estate development” from “building.” Louis Lesser who wrote an article in New York Times emphasized that the job of a real estate developer is to purchase the land, finance the contract and let the best builders build at a set price. They do not build them selves.

Developers purchase land, put money into real estate contracts, build or let builders complete projects, craft, visualize, manage and organize the development process all the way through completion. The restoration process is a great risk for developers but in the end they receive the utmost rewards. The responsibilities of developers typically include purchasing land, finding out the marketing of the property, making a building program and design, acquiring the required public approval and investments, constructing the structure and leasing, controlling and in the end, selling it.

Along each stage of the process, developers work with various persons such as architects, engineers, city planners, surveyors, contractors, inspectors, leasing agents and more.

How to Enter a Development Field

There is no single way to succeed in the field of real estate development. In fact most developers come from different fields such as mortgage banking, real estate brokerage, construction, consulting, architecture, lending, legal services and others. However recently, there have been educational programs which grant a Master of Real Estate Development degree. Graduate programs in real estate development are the most all – embracing education in the industry. A Master of Science in Real Estate and an MBA are other examples of formal education.

Organizing a development team can be done in many ways. A company could offer several services from architecture to engineering. However it is also possible for a development company to be made up of only a single principal and a small number of personnel who contract with other companies for each service when required.

The development process necessitates the expertise of various professionals such as landscape architects, architects, civil engineers, site planners, market consultants, attorneys, environmental consultants, soils engineers and surveyors to deal with the many aspects taken in the field of real estate development.

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