What is a 'net lease'?

A 'net lease' is characterized by the tenant agreeing to pay not only the base rent but also some or all of the property's operating expenses. This typically includes costs such as property taxes, insurance, and maintenance, which may be additional to the rent. By sharing these expenses, the landlord can maintain a more predictable income from the property, while the tenant has more control over the operating costs associated with their leased space.

This understanding of a net lease is important in property management and leasing negotiations, as it allows both landlords and tenants to clearly delineate their financial responsibilities under the lease agreement. The structure is commonly used in commercial real estate, where tenants may have more involvement in the management of the property.