Texas Real Estate Brokerage Sales Apprentice Education (SAE) Practice Exam

In what type of lease does the landlord share in the tenant's gross receipts or sales?

1. Fixed Lease

2. Percentage Lease

3. Step Lease

4. Base Rent Lease

The correct answer is: Percentage Lease

A percentage lease is a type of lease agreement where the landlord receives a portion of the tenant's gross receipts or sales in addition to, or instead of, a fixed rental amount. This arrangement is particularly common in retail businesses where the tenant's income can fluctuate. The percentage rent allows landlords to benefit from the success of their tenants while providing tenants the flexibility of lower initial fixed costs. This type of lease aligns the interests of both parties: as the tenant's business grows and their sales increase, so does the landlord's income. The other types of leases listed operate differently. A fixed lease involves a set rental amount that does not change, regardless of the tenant's income. A step lease has a predetermined increase in rent at specified intervals, but it does not tie the rent amount to the tenant's sales revenue. A base rent lease typically refers to a lease that includes a base amount of rent without the variable component based on sales. Each of these structures serves different strategic needs in the rental market, but when it comes to sharing in the tenant's sales, the percentage lease is uniquely designed for that purpose.