What is one key characteristic of a net lease?

One key characteristic of a net lease is that the tenant pays rent plus some operating expenses. In a net lease agreement, the tenant not only is responsible for the base rent but also for additional costs that might include property taxes, insurance, and maintenance expenses. This arrangement shifts some of the financial responsibilities from the landlord to the tenant, making it an attractive option for landlords who want a more predictable cash flow while limiting their own financial obligations related to the property. This structure helps ensure that the property is maintained properly, as the tenant has a vested interest in managing those costs effectively.

In contrast, when the landlord pays all expenses, it describes a gross lease, where the tenant pays only rent without additional financial responsibilities. When the tenant handles only maintenance costs, it does not encompass the full scope of a net lease, which usually includes multiple other expenses. Lastly, a lease contingent on tenant sales revenue relates to profit-sharing arrangements and is not a standard feature of a net lease.