What is a 'net lease'?

A 'net lease' is characterized by the lessee paying not only the agreed-upon rent but also additional expenses associated with the property. These expenses can include property taxes, insurance, and maintenance costs. This type of lease structure allows lessors to minimize their risk and ensures that lessees are responsible for the operational costs of the property, which can vary and may not be predictable in a standard lease agreement.

This arrangement is particularly common in commercial real estate, where the nature of the investment often necessitates that the lessee cover these additional costs to maintain the property's value and ensure its upkeep. Understanding this concept is crucial for those involved in leasing law, as it delineates the responsibilities and financial obligations of both lessors and lessees, influencing lease negotiations and financial forecasting.

The other choices describe different types of lease agreements that do not align with the 'net lease' definition. For example, a lease that only includes rent payments does not encompass the additional financial responsibilities that define a net lease. A lease for residential property typically follows a different regulatory framework and may not include the same cost structures. Lastly, a lease involving a transfer of ownership at the end of the term refers to a different type of lease arrangement entirely, such as a finance