Texas Real Estate Sales Agent ExamContractsMedium
A landlord and a tenant enter into a lease agreement for a commercial property. The lease specifies an initial base rent of $3,000 per month for the first year, with subsequent annual increases tied to the Consumer Price Index (CPI). This type of lease is known as what?
- AGross Lease
- BPercentage Lease
- CNet Lease
- DIndex Lease
Show answer & explanationAnswer & explanation
Correct answer: D. Index Lease
An index lease is a lease agreement where the rental payments are adjusted periodically based on a specific economic indicator, such as the Consumer Price Index (CPI).
Why the other options are wrong
- A. A Gross Lease requires the tenant to pay a fixed rent, and the landlord pays all property expenses.
- B. A Percentage Lease requires the tenant to pay a base rent plus a percentage of their gross sales.
- C. A Net Lease requires the tenant to pay a base rent plus some or all of the property's operating expenses.
Index Lease
A type of lease where the rental payments are adjusted periodically based on an agreed-upon economic index, such as the Consumer Price Index (CPI).
- Rent fluctuates based on an index
- Common in long-term commercial leases
- Protects landlord against inflation
Memory trick: Index finger points to the CPI for rent changes.