Does the lease say "net" or does it list what the tenant actually pays

Caps on CAM reimbursements killed my projected NOI by $14k annually on a Stockton deal before I caught them.

The gap you found is real and more common than the marketing materials suggest. "Triple net" gets used as a shorthand that means different things in different documents.

A true NNN lease passes all three cost categories, taxes, insurance, and maintenance, to the tenant with no caps and no carve-outs. What you are describing sounds more like a modified net lease, where the tenant pays reimbursables up to a ceiling, and anything above that ceiling falls back on you as the owner. Some of those caps are set at a dollar amount, some at a percentage of base rent, and some reset annually in ways that look favorable until you model a repair-heavy year.

Two specific things worth checking in the lease body. First, the definition of CAM (common area maintenance, meaning shared costs like parking lot upkeep and landscaping). Some leases define CAM narrowly and exclude structural repairs entirely, which keeps those costs with the landlord. Second, look at whether the caps are gross or per-category. A single $15,000 annual cap across all three buckets behaves very differently from three separate $15,000 caps.

This is the kind of question where a commercial real estate attorney needs to read the actual lease, not the OM summary. I can explain the structure, but lease language has legal weight and the interpretation matters for what you actually owe.

What you caught by reading past the OM is exactly the right instinct. The strategy guide for NNN notes that tenant credit and asset quality are where the work lives, and I would add lease structure sits right alongside both of those.

One thing I would want to know: do you have a sense of what costs the capped categories are likely to run annually on this specific property, so you can size the exposure you are taking on if the tenant hits those ceilings?

That gap is common enough that it has a name among NNN brokers: modified gross dressed as net. The OM language almost always reflects the lease structure in its best light, and "triple net" in a marketing summary frequently means "closer to net than gross" rather than "tenant pays all three expense categories without limitation."

The caps you found are the part that matters most here. A reimbursable category with a cap converts that exposure from the tenant's problem to yours the moment costs exceed the ceiling. Roof and structure caps are the most common place this appears, and HVAC is a close second. If the lease caps the tenant's maintenance reimbursement at, say, 15% above base year costs, any spike beyond that lands on you. That is not a passive income stream, that is a contingent liability sitting inside a document that the OM called triple net.

The assumption doing the most work in a NNN purchase is that the rent you underwrite is the income you will receive. Capped reimbursables mean your effective net rent is the base rent minus any expense overage you absorb. On a pad site with one tenant and no other income to offset a shortfall, that arithmetic matters a great deal.

The risk you did not mention is base year selection. If the lease was executed in a low-cost year, the base from which cap calculations run is artificially low, and the caps bite sooner than they appear to. Ask for the actual base year figures and model what the caps look like against current expense levels, not theoretical ones.

One thing worth confirming with a commercial real estate attorney before close: whether the lease language creates any ambiguity about which party bears expenses that fall outside the listed reimbursable categories entirely. Gaps in category coverage can be as expensive as capped ones.

What categories specifically carried the caps, and do you have the base year cost figures to compare against current operating expenses on that pad?

The caps are the rule in suburban retail, not the exception, and the OM summary almost never shows them because the broker builds the rent roll from the tenant's base rent plus uncapped reimbursables and calls the result "NNN income."

What I need to know to tell you how much exposure you have: what is the cap structure on each category, specifically whether it is a fixed dollar ceiling per square foot per year or a percentage increase limit tied to the prior year's actual, because those two mechanics produce completely different landlord liability as the building ages and repairs stack up.

Two of my four tenants have leases where the word "net" appears in the header and then somewhere around page 14 there's a cap on management fees that effectively puts a ceiling on what I can recover. I did not catch either one until year two when actuals came in and I was short. What I have never seen discussed is what happens when a cap is a flat dollar figure written in 2019, because inflation has already eaten into what I can actually pass through, and by year five of a ten-year term that gap compounds into something real. The OM is basically marketing and the lease is the deal, but even the lease can lie to you slowly over time if the caps aren't tied to CPI. What do your two capped categories cover specifically, is one of them roof and structure?

What categories have caps, CAM or roof/structure?

The more precise question is whether those caps are absolute dollar figures per square foot or percentage-of-prior-year increases, because the two create very different long-run exposure for you as landlord. A flat PSF cap erodes slowly in a low-inflation environment but blows up fast when insurance premiums spike the way they have in suburban Denver markets over the last few years. A year-over-year percentage cap compounds in your favor during quiet periods but still leaves you holding the overage in any bad year.

The piece worth pricing before you get to NOI is what happens to your debt service coverage if you absorb the capped categories at current replacement cost, because a lender underwriting this deal will stress those reimbursables and may not give you full credit for lease language that limits tenant exposure.

What are the two capped categories specifically, and do the caps reset annually or run for the full lease term?

The assumption doing the most work in a "triple net" label is that it describes an obligation, when in most suburban retail leases it describes an intent that the body of the lease then qualifies extensively. What you found is the lease functioning as designed, not a drafting error, which means the OM headline and the lease body are both technically accurate and completely inconsistent in what they imply about your exposure.

The caps matter differently depending on whether they sit on CAM, roof and structure, or taxes, because those three have very different volatility profiles over a ten-year hold. A CAM cap at three percent annual increases is irritating; a cap on roof and structure reimbursement against a 25-year-old building with a membrane that has never been replaced is a liability the seller has already priced into the asking price without disclosing it as such.

Which categories carry the caps you found?