Which lease type typically requires the tenant to pay property taxes and insurance?

A net lease is a type of lease in which the tenant is responsible for paying additional costs that are associated with the property, including property taxes, insurance, and maintenance expenses. This structure contrasts with a gross lease, where the landlord typically covers these costs and the tenant pays a single, consolidated rent amount. By requiring the tenant to take on these additional financial obligations, a net lease can result in lower base rent; however, it also means that the tenant has to budget for these extra expenses carefully.

This arrangement is commonly used in commercial real estate, where tenants are often more equipped to handle the costs associated with property upkeep and can negotiate these terms based on the specific needs of their business operations. Understanding the intricacies of lease types such as net leases is crucial for anyone involved in real estate transactions, as they directly affect cash flow, liability, and overall management of the property.