Texas Real Estate Sales Agent ExamContractsMedium
A tenant is renting a commercial space under a lease agreement that states the rent will increase by 3% annually. What type of lease is this?
- AGross Lease
- BIndex Lease
- CNet Lease
- DGraduated Lease
Show answer & explanationAnswer & explanation
Correct answer: D. Graduated Lease
A graduated lease specifies rent increases at predetermined future dates or intervals. In this case, a 3% annual increase is a predetermined schedule.
Why the other options are wrong
- A. A gross lease is defined by who pays expenses, not how rent changes over time.
- B. An index lease ties rent increases to an economic indicator (like the CPI), not a fixed percentage increase.
- C. A net lease is defined by who pays expenses, not how rent changes over time.
Graduated Lease
A lease agreement in which the rental payments increase at specified intervals by predetermined amounts or percentages.
- Often used in long-term leases to account for inflation or increasing property value.
- Rent adjustments are known in advance.
- Provides predictable rent increases for both landlord and tenant.
Memory trick: G.I.R.L. - Graduated, Index, Reappraisal, Level (flat) describe rent changes.