Executory cost definition
/What is an Executory Cost?
An executory cost is any expenditure not included in the minimum ongoing payments associated with a lease. These expenditures are usually related to the ongoing maintenance of or operating costs associated with property. Depending on the terms of a lease agreement, the lessee may reimburse the lessor for any executory costs incurred by the lessor, or the lessor may take responsibility for these costs. These costs can be substantial, and so can be a major point of negotiation when entering into a lease contract.
Examples of Executory Costs
Below are the main types of executory costs:
Maintenance costs. Expenses for maintaining or repairing the leased asset to keep it in good condition.
Property taxes. Taxes assessed on leased property by local or state authorities.
Insurance costs. Insurance coverage for damage to leased assets.
Utility costs. Costs required to operate a leased asset, such as electricity, gas, and water.
Administrative fees. Miscellaneous fees for managing the property, such as property management fees and inspection charges.
Security costs. Expenses related to securing leased property, such as security personnel and monitoring systems.