PSI Oklahoma Real Estate Practice Test

Under which lease type does the tenant pay for property taxes and maintenance?

1. Gross lease

2. Percentage lease

3. Net lease

4. Short-term lease

The correct answer is: Net lease

In a net lease, the tenant is responsible for paying certain expenses in addition to the base rent, which often includes property taxes, maintenance costs, and insurance. This type of lease arrangement allows landlords to pass on a portion of the property's operating expenses to the tenant, which can be financially beneficial for the landlord. Typically, there are several variations of net leases, like single net leases (where tenants pay property taxes), double net leases (where tenants pay property taxes and insurance), and triple net leases (where tenants are responsible for property taxes, insurance, and maintenance). This structure makes net leases common in commercial real estate, as it provides landlords with predictable income and reduces their risk associated with fluctuating expenses. On the other hand, a gross lease generally sees the landlord cover all operating expenses, including taxes and maintenance. Percentage leases tie rent to a tenant's sales revenue, and short-term leases can refer to various rental agreements but don't inherently specify who is responsible for property costs. Thus, the net lease is the most accurate choice for a lease type where the tenant pays for property taxes and maintenance.