Executory costs may be paid by which party?

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Prepare for the CLFP Financial and Tax Accounting for Leases Exam with comprehensive practice sets, flashcards, and detailed explanations. Master the concepts and navigate the real exam with confidence!

Multiple Choice

Executory costs may be paid by which party?

Explanation:
Executory costs are ongoing, operating expenses of the leased asset that aren’t included in the fixed minimum lease payments. They cover items like property taxes, insurance, maintenance, and utilities. Which party pays them depends on the lease terms. In a gross lease, the lessor pays these costs; in a net lease, the lessee pays; there are also blended or modified structures where responsibility can vary. So, these costs may be paid by either party, depending on the contract.

Executory costs are ongoing, operating expenses of the leased asset that aren’t included in the fixed minimum lease payments. They cover items like property taxes, insurance, maintenance, and utilities. Which party pays them depends on the lease terms. In a gross lease, the lessor pays these costs; in a net lease, the lessee pays; there are also blended or modified structures where responsibility can vary. So, these costs may be paid by either party, depending on the contract.

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