Executory costs may be paid by which party?

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Prepare for the CLFP Financial and Tax Accounting for Leases Exam. Utilize engaging flashcards, multiple choice questions with hints and detailed explanations to enhance your study experience. Align your knowledge for exam success!

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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