In a net lease, who is responsible for operational expenses?

In a net lease, the primary responsibility for operational expenses falls on the tenant, in addition to paying the base rent. This structure means that the tenant is accountable for costs such as property taxes, insurance, and maintenance expenses, which are typically considered operational costs. The rationale behind this arrangement is that it allows landlords to reduce their financial burden related to these expenses, while tenants receive a more predictable monthly rent amount that includes these additional costs.

This set-up also provides an incentive for tenants to manage the property responsibly, as they directly bear the consequences of high operational costs. It creates a clear delineation of responsibilities that can be beneficial for both parties. Understanding this aspect is critical for property managers and landlords to ensure clarity in lease agreements and financial planning.