2026-10-10 11:21

What is a double net lease?

A double net lease is a commercial lease under which the tenant, on top of the rent, bears most of the property's costs: property tax (Grundsteuer), insurance, day-to-day operating costs and upkeep of the premises. Roof and structure (Dach und Fach) remain with the landlord, and because German law does not define the term, only the lease decides what it covers. In our experience, most leases in German food retail are structured this way, and even under them the owner of a new supermarket bears non-recoverable costs of roughly 8–15% of net rent.

The law puts the costs on the landlord; the lease reallocates them

By default, the landlord must keep the property fit for use and bear the charges on it, such as property tax (§ 535(1) BGB). In a commercial lease the parties may agree otherwise, but the lease must name each item clearly. A reference to "operating costs" within the meaning of the Operating Costs Ordinance (Betriebskostenverordnung, BetrKV) covers neither management nor repairs: both are excluded from that definition (§ 1(2) BetrKV). Management costs can be passed on even by a standard-form clause, provided it names them expressly, and even without a cap (BGH, judgment of 9 December 2009, XII ZR 109/08).

A full triple net, under which the tenant is responsible for the roof as well, is rare in German food retail, and case law is one reason. A standard-form clause can shift maintenance and repair to a commercial tenant only for damage arising from the tenant's use or sphere of risk (BGH, judgment of 6 April 2005, XII ZR 158/01). Roof and structure usually lie outside that sphere. The German double net therefore puts more on the tenant than its American namesake, but stops at Dach und Fach (see Part 10 of the series German Prime Retail).

Exhibit 1. Under a German double net, roof, structure and the owning company's own costs stay with the landlord

Cost item	Double net in German food retail	Full triple net
Property tax	Tenant, if the lease says so	Tenant
Building, liability and loss-of-rent insurance	Usually the tenant	Tenant
Water, sewerage, waste collection, cleaning	Tenant	Tenant
Interior and the tenant's own installations	Tenant	Tenant
Property management	Tenant, only if agreed	Tenant
Car park and external areas	Varies	Tenant
Roof and structure	Landlord	Tenant
Accounting and reporting of the owning company	Landlord	Landlord

The allocation is typical, in our experience, but not universal: every lease is negotiated individually.

Between 8% and 15% of the rent stays with the landlord

In our experience, the non-recoverable costs of a new supermarket with a modern lease come to roughly 8–15% of net rent; older stores and weaker leases cost more (Part 10). Valuers use similar standard allowances: 3% of gross rent for management and 4% for the risk of rent loss. For maintaining a food store whose roof and structure the landlord keeps up, they take half the residential allowance (ImmoWertV, Annex 3). At a rent of €12 per m² a month, that comes to roughly 11–12% of the rent (our calculation).

Every 10% of rent left with the landlord takes 0.6 percentage points off a 6.0% yield. The words "double net" in a sales brochure are no substitute for reading the lease. In our Mannheim case, the new Netto lease did not let the landlord pass any costs at all on to the tenant (Part 7).

Implications for investors

1. Read the list of cost items, not the label. German law has no such term as double net: the tenant bears only the costs that the lease names clearly — property tax, insurance, management.

2. Budget for roof and structure as your own cost. A standard-form clause will usually not shift them to the tenant. In our experience, the owner of a new supermarket therefore still bears roughly 8–15% of net rent in non-recoverable costs, and more for older stores and weaker leases.

3. Compare the yield after non-recoverable costs, not the one in the brochure. Every 10% of rent left with the landlord takes 0.6 percentage points off a 6.0% yield.

What to check:
• Check whether the lease's list of recoverable items names property tax, insurance and management.
• Establish who is responsible for the roof, structure, building services and the car-park surface.
• Find out who owns and services the refrigeration and other operating equipment (Betriebsvorrichtungen).
• Request the service-charge statements for the last three years and details of any unresolved disputes.
• Calculate the yield after non-recoverable costs and compare it with the one in the brochure.

Sources: § 535(1) BGB; §§ 1, 2 BetrKV; ImmoWertV, Annex 3; BGH, judgments of 6 April 2005, XII ZR 158/01, and of 9 December 2009, XII ZR 109/08; the series German Prime Retail, Parts 7 and 10; Gordon Real Estate Group experience. Legal position as of October 2026.

Photo: Jan-Philipp Thiele / Unsplash

This page is general information and not investment, legal or tax advice.

Ilya Gordon