National Real Estate Exam (PSI)Leasing and Property ManagementMedium
A landlord and tenant agree to a lease where the rent for the initial year is $1,200 per month, with a 3% increase scheduled for the start of the second year, and another 3% increase for the third year. What type of lease is this?
- AIndex Lease
- BNet Lease
- CGraduated Lease
- DGross Lease
Show answer & explanationAnswer & explanation
Correct answer: C. Graduated Lease
A graduated lease specifies rent increases at predetermined future dates or intervals. The scenario describes exactly this, with a 3% increase at the start of both the second and third years.
Why the other options are wrong
- A. An index lease ties rent increases to an external economic index, not fixed percentages.
- B. A net lease defines tenant responsibility for expenses, unrelated to scheduled rent increases.
- D. A gross lease defines who pays expenses, not how rent changes over time.
Graduated Lease
A lease agreement where the rent payments increase or decrease at specified intervals or at certain points during the lease term.
- Rent changes are predetermined and scheduled.
- Often used to help new businesses get started with lower initial costs.
- Distinct from index leases which link rent to an economic indicator.
Memory trick: GRADUATED means the rent goes up like steps on a ladder.