National Real Estate Exam (PSI)Leasing and Property ManagementEasy
A tenant's lease for a commercial property states that the tenant is responsible for paying property taxes, insurance, and maintenance costs in addition to the base rent. What type of leasehold is this?
- AGraduated Lease
- BGross Lease
- CNet Lease
- DPercentage Lease
Show answer & explanationAnswer & explanation
Correct answer: C. Net Lease
A net lease requires the tenant to pay a base rent plus some or all of the property's operating expenses, such as taxes, insurance, and maintenance. This scenario specifically describes these additional tenant responsibilities.
Why the other options are wrong
- A. A graduated lease has rent that increases at predetermined intervals, not based on operating expenses.
- B. A gross lease typically includes all operating expenses within the base rent, which is contrary to the scenario.
- D. A percentage lease involves rent based on a percentage of the tenant's gross sales, not additional operating expenses.
Net Lease
A lease agreement where the tenant pays a base rent plus some or all of the property's operating expenses.
- Tenant pays base rent + expenses (taxes, insurance, maintenance).
- Common in commercial real estate.
- Can be single, double, or triple net depending on which expenses are covered.
Memory trick: NET results in the tenant paying for more.