NNN, gross or modified gross: which lease structure protects you
“My expenses keep going up and my rent doesn't cover them.”
By Jose Eduardo Hernandez · REALTOR®, KW Commercial · Nov 2026
The lease structure decides who pays when taxes, insurance and maintenance rise. Choosing the wrong one quietly eats your return.
- Triple net (NNN): the tenant pays base rent plus their share of property taxes, insurance and common area maintenance. Your income is more predictable because rising costs pass through.
- Gross: the tenant pays one rent and you cover the operating costs. It's simpler to market, but every tax or insurance increase comes out of your pocket.
- Modified gross: a middle ground where costs are split, often with the tenant covering increases over a base year.
For most retail owners, NNN is the standard because property taxes and insurance can rise faster than rent. If you offer gross or modified gross to compete, build in annual rent increases and a base-year expense stop.
Before your next lease: add up what you paid last year in taxes, insurance and upkeep. Compare it to the rent you collected. If the gap is shrinking each year, your lease structure is the first thing to fix.
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General information for Illinois owners, buyers and sellers, not legal, tax or lending advice. Every property and lease is different; talk with an attorney, accountant or lender about your situation.