PSI Virginia Real Estate Practice Exam

In an Absolute Net Lease, who pays for operating expenses?

1. The landlord pays all expenses

2. The tenant is responsible for all operating expenses

3. Both share the costs equally

4. There are no operating expenses involved

The correct answer is: The tenant is responsible for all operating expenses

In an Absolute Net Lease, the tenant is responsible for all operating expenses. This type of lease is structured so that the tenant not only pays the rent but also takes on the burden of all property-related costs, which may include property taxes, insurance, and maintenance. This arrangement is beneficial for landlords because it provides them with a stable income without the concerns of fluctuating property expense responsibilities. By placing all operating expenses on the tenant, landlords can forecast their income and not worry about unexpected costs or rising expenses associated with the property. This arrangement can make absolute net leases appealing for investors looking for a more passive role in property management. The other possible answers indicate different arrangements not applicable to an absolute net lease, such as the landlord covering all expenses or both parties sharing costs.