Texas Real Estate Sales Agent ExamContractsEasy
A tenant signs a lease agreement for a commercial space. The lease states that the tenant is responsible for paying a fixed monthly rent, plus a pro-rata share of the building's property taxes, insurance, and common area maintenance (CAM) charges. What type of lease has the tenant entered into?
- APercentage Lease
- BGraduated Lease
- CNet Lease
- DGross Lease
Show answer & explanationAnswer & explanation
Correct answer: C. Net Lease
A Net Lease, specifically a Triple Net (NNN) Lease, requires the tenant to pay a fixed rent plus a share of the property's operating expenses, including property taxes, insurance, and common area maintenance (CAM).
Why the other options are wrong
- A. A Percentage Lease involves rent based on a percentage of the tenant's gross sales, typically in retail.
- B. A Graduated Lease features rent increases at predetermined intervals, not tied to operating expenses.
- D. A Gross Lease involves the tenant paying a fixed rent, and the landlord covers all operating expenses.
Net Lease
A type of commercial lease where the tenant pays a fixed rent plus some or all of the property's operating expenses, such as property taxes, insurance, and maintenance.
- Can be Single Net (taxes), Double Net (taxes + insurance), or Triple Net (taxes + insurance + CAM).
- Shifts more financial responsibility to the tenant.
- Common in commercial and industrial properties.
Memory trick: Gross Tenants Pay All, Net Tenants Share More.