Legal Term
Triple Net Lease Expense Cap Negotiation
Legal Definition
A contractual provision in a commercial triple net (NNN) lease that limits the annual growth or total amount of operating expenses (typically property taxes, insurance, and common area maintenance) for which the tenant is responsible, negotiated to provide cost predictability and allocate financial risk between landlord and tenant.
In Plain English
A limit on the extra costs (like taxes and maintenance) a business tenant must pay on top of rent in a commercial lease. Negotiating this cap helps prevent surprise bills.
Example in a Contract
Section 4. Operating Expense Cap. Tenant's annual obligation for Operating Expenses (as defined in Exhibit B) shall not exceed one hundred five percent (105%) of the Operating Expenses paid for the Base Year (2024), adjusted annually by the Consumer Price Index. 'Operating Expenses' shall exclude capital improvements, leasing commissions, and extraordinary expenses due to casualty or condemnation. Tenant shall have the right to audit Landlord's expense records upon thirty (30) days written notice and at Tenant's sole cost, provided such audit is commenced within one hundred eighty (180) days of receipt of the annual expense statement.
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