California Real Estate Broker ExaminationContractsEasy
A tenant signs a lease agreement for a commercial property. The lease specifies that the tenant is responsible for property taxes, insurance, and all maintenance and repairs, in addition to the monthly rent. What type of leasehold estate has been created?
- ASandwich Lease
- BPercentage Lease
- CNet Lease
- DGross Lease
Show answer & explanationAnswer & explanation
Correct answer: C. Net Lease
A Net Lease, particularly a 'triple net lease' as described here, is one where the tenant pays not only rent but also a share or all of the property's operating expenses, such as property taxes, insurance, and maintenance.
Why the other options are wrong
- A. A Sandwich Lease is typically used in a sublease situation where the original tenant becomes the sublessor.
- B. A Percentage Lease involves rent based on a percentage of the tenant's gross sales.
- D. A Gross Lease is where the landlord pays all property expenses.
Net Lease
A lease agreement where the tenant pays a base rent plus some or all of the property's operating expenses.
- Expenses can include taxes, insurance, and maintenance.
- Often used for commercial properties.
- A 'triple net lease' includes all three major operating expenses.
Memory trick: Remember, 'Net' means 'After expenses', so the tenant pays the net amount plus extras.