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

What does a gross lease entail for tenants?

1. The tenant pays a base rent and all operating expenses

2. The tenant pays a flat rental fee while the owner covers taxes and maintenance

3. The tenant pays only for utilities

4. The tenant is responsible for property improvements

The correct answer is: The tenant pays a flat rental fee while the owner covers taxes and maintenance

A gross lease is a type of leasing arrangement where the tenant pays a flat rental fee, and the landlord is responsible for covering a variety of operating expenses associated with the property, such as property taxes, maintenance, and insurance costs. This simplifies the financial obligations for tenants because they are not responsible for fluctuations in operational costs—these costs are absorbed by the landlord. The stability of monthly expenses with a gross lease can be advantageous for tenants, as it allows for easier budgeting without the surprises of varying operational expenses, making their financial planning more straightforward. In contrast, other lease types could transfer those operational costs to the tenant, which can lead to unpredictability in overall rental costs. Thus, under a gross lease, tenants benefit from a predictable rental expense without taking on additional duties related to property upkeep or financial liabilities.