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

What type of lease provides for set rent increases to take effect at stated times?

1. Step Lease

2. Percentage Lease

3. Escalation Clause

4. Fixed Lease

The correct answer is: Step Lease

A step lease is specifically designed to include predetermined rent increases that occur at specified intervals during the lease term. This structure allows both landlords and tenants to plan for future financial commitments with clarity. For the landlord, it guarantees a gradual increase in rental income, while for the tenant, it provides certainty about rent obligations at specific points, allowing them to budget accordingly. In contrast, a percentage lease typically ties rental payments to a percentage of the tenant's revenues, commonly used in retail scenarios. An escalation clause serves to adjust rent in response to certain factors, such as increases in operating costs or property taxes, rather than setting firm increase dates. A fixed lease establishes a constant rent amount that remains unchanged throughout the lease term. Thus, while these other lease types may serve different purposes, the defining feature of a step lease is its scheduled rent increases.