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

What is the description of a double net lease?

1. The tenant pays only the base rent

2. The tenant pays for property taxes and community maintenance in addition to rent

3. The landlord charges a fixed rental fee plus maintenance costs

4. The tenant is responsible for all utilities and base rent

The correct answer is: The tenant pays for property taxes and community maintenance in addition to rent

A double net lease is a type of lease arrangement in which the tenant agrees to pay not only the base rent but also the property taxes and insurance premiums associated with the property. This structure allows the landlord to receive a more predictable income since some of the variable costs are shifted to the tenant. The key characteristics of a double net lease include the obligations placed on the tenant to cover specific costs beyond just the base rent. With these additional financial responsibilities, the tenant has a direct stake in managing and maintaining these aspects of the property, which can influence their overall costs and the way they approach property management. Other lease types, such as a single net lease or a gross lease, do not delegate this amount of financial responsibility to the tenant in the same way. In a single net lease, for example, the tenant may pay for property taxes while the landlord handles insurance and maintenance, whereas in a gross lease, the landlord typically covers all expenses related to the property, leading to a higher fixed rental fee. In this context, option B accurately captures the essence of a double net lease by specifying that the tenant's obligations include both rent and certain operating expenses like property taxes.