Certified Residential Appraiser Practice Exam

What type of lease requires a tenant to pay for everything except structural repairs?

1. Flat Rental Lease

2. Index Lease

3. Market Rent

4. Net Operating Income

The correct answer is: Flat Rental Lease

The appropriate term for a lease in which a tenant is responsible for all expenses except for structural repairs is a flat rental lease. In this type of agreement, the rental price is typically set at a fixed amount, and although it provides the tenant with predictable rent payments, it also places the burden of other costs (such as utilities, maintenance, property taxes, and insurance) squarely on the tenant. This arrangement is particularly common in commercial real estate, where landlords expect tenants to handle various operational costs. In contrast, an index lease adjusts the rent based on a specific economic index, ensuring that the rental amount fluctuates with market conditions, rather than placing the repair responsibilities on the tenant. Market rent refers to the rental amount that a property could fetch on the open market, which does not directly denote lease terms regarding responsibility for repairs. Lastly, net operating income (NOI) is a metric used to assess the profitability of an income-generating property and is not a type of lease. Thus, the flat rental lease is the correct answer, as it aligns with the criteria of the tenant responsible for all expenses except structural repairs.