Florida Real Estate Sales Associate Examination Content OutlineReal Estate Contracts and AgencyEasy
A tenant signs a lease agreement for a commercial space where they will operate a retail store. The lease specifies a fixed monthly rent payment, but also includes a provision that the tenant must pay an additional amount based on the property taxes and insurance premiums incurred by the landlord. What type of leasehold estate has been created?
- AA ground lease
- BA gross lease
- CA net lease
- DA percentage lease
Show answer & explanationAnswer & explanation
Correct answer: C. A net lease
A net lease requires the tenant to pay a fixed rent plus a share of the property's operating expenses, such as property taxes, insurance, and sometimes maintenance. This aligns with the scenario described.
Why the other options are wrong
- A. A ground lease involves leasing only the land, with the tenant owning or building the improvements.
- B. A gross lease typically includes all property expenses within the fixed rent payment.
- D. A percentage lease involves rent based on a percentage of the tenant's gross sales, often with a minimum base rent.
Net Lease
A lease agreement where the tenant pays a fixed base rent plus a portion or all of the property's operating expenses, such as property taxes, insurance, and maintenance.
- Tenant pays fixed rent + some expenses.
- Can be single net (taxes), double net (taxes + insurance), or triple net (taxes + insurance + maintenance).
- Common in commercial real estate.
Memory trick: Leases define who pays what in a rental agreement.