Beyond the Base Rent: The Reality of Triple Net Leases for Cannabis Businesses

When discussing real estate options with cannabis clients, I often find they've been offered triple net (NNN) leases with little explanation of what this means for their business. During my nine years as a marijuana business attorney, I've seen many clients shocked after signing leases without understanding what they are getting into. Let's break down what a "triple net lease" really means for you’re in the cannabis business.

What Is a Triple Net Lease?

In a regular lease (called a gross lease), you pay one rent amount. You usually pay for your own utilities, and the landlord handles all the other costs.

In a triple net lease (sometimes written as "NNN"), you pay:

  • Your base rent

  • PLUS the landlord’s property taxes

  • PLUS the landlord’s building insurance

  • PLUS the landlord’s maintenance costs

That "triple" refers to those three extra costs that shift from the landlord to you.

Why Cannabis Landlords Love These Leases

Almost every cannabis property uses a triple net lease. Here's why landlords prefer them:

  • They avoid risk: The landlord stays at arm's length from your pot business

  • They protect themselves: If costs suddenly increase, that's your problem, not theirs

  • They have the upper hand: With limited cannabis-zoned properties, they can set the terms

Despite what some might tell you, triple net leases aren't designed to benefit tenants. Let's be honest about the reality.

The "Lower Base Rent" Myth

Some say NNN leases have lower base rent. But what matters is your total monthly cost.

The reality: Cannabis properties already rent for 2-3 times normal rates. The total you pay (base rent + all those extras) is almost always higher than standard commercial rents, no matter what lease type you have.

Protecting Your Business: What to Negotiate

Because most cannabis properties use NNN leases, your best strategy is to improve the specific terms:

1. Get Cost Protections

  • Cap yearly increases: Limit how much NNN costs can go up each year

  • Exclude major repairs: Try to make the landlord responsible for roof, foundation and structural repairs

  • Get a maintenance limit: Set a maximum amount you'll pay yearly for repairs

2. Know the True Costs Upfront

Before signing, ask for:

  • Last year's property tax bills

  • Current insurance costs

  • Utility bills from previous tenants

  • Recent repair history

  • Building inspection reports

3. Plan for Regulation Changes

  • Clear responsibility: Specify who pays if regulations require building changes

  • Exit options: Create ways to end the lease if regulations make the location unworkable

  • Renewal rights: Secure the right to extend your lease at fair rates

4. Get Everything in Writing

The most important rule: if something matters to your business, get it in writing. Verbal promises from landlords aren't worth much when problems arise.

Real Talk: Why These Leases Are Here to Stay

Triple net leases dominate cannabis real estate because:

  1. Limited properties: Few buildings are zoned for marijuana use

  2. Risk premiums: Landlords want extra compensation for cannabis businesses

  3. Banking concerns: Many landlords fear issues with their banks

Most cannabis businesses accept NNN leases not because they're good deals, but because they have few alternatives in a tight market.

Bottom Line: Eyes Wide Open

The key to surviving a triple net lease is understanding exactly what you're getting into and budgeting for the total cost—not just the base rent.

If a property owner offers you a "great deal" on base rent, but it's a triple net lease, remember to:

  • Add up ALL the costs

  • Build in a buffer for increases

  • Negotiate caps and exclusions

  • Get professional help reviewing the lease

With proper planning and negotiation, you can make a triple net lease workable for your cannabis business—even if it's not ideal.

 

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