Certified Pennsylvania Evaluator Practice Exam

What defines a Gross Lease?

1. The tenant pays a fixed base rent and the landlord pays all expenses.

2. The tenant pays all property expenses without base rent.

3. The landlord pays a fixed rent while the tenant covers expenses.

4. The tenant pays rent based on property value fluctuations.

The correct answer is: The tenant pays a fixed base rent and the landlord pays all expenses.

A Gross Lease is characterized by an arrangement where the tenant pays a fixed base rent and the landlord assumes the responsibility for all property-related expenses. This type of lease is advantageous for tenants because it simplifies budgeting, as they only need to understand their rental obligation without worrying about variable costs such as maintenance, property taxes, and insurance. The landlord, in this case, absorbs the financial risks associated with these expenses, which can create a more predictable income stream for them. In contrast, the other options describe different leasing arrangements. For example, when a tenant pays all property expenses without a base rent, it resembles a net lease rather than a gross lease. Similarly, if the landlord pays a fixed rent while the tenant covers expenses, this again disqualifies it from being classified as a gross lease. Lastly, the scenario where rent fluctuates based on property value does not align with the stability offered by a gross lease structure, where rent remains constant regardless of other financial considerations. This clarity in roles and payment obligations is what distinctly defines the Gross Lease, making it a fundamental concept in real estate rental agreements.