Massachusetts Real Estate License Practice Test

What does a graduated lease allow for?

1. Fixed rent throughout the lease term

2. Variable rent that increases at specified intervals

3. Rent that decreases over time

4. Rent only paid when sales exceed a limit

The correct answer is: Variable rent that increases at specified intervals

A graduated lease is designed to provide variable rent that increases at specified intervals throughout the lease term. This type of lease structure is often used in commercial real estate and allows landlords to adjust rent in a way that reflects market conditions or the growing value of the property over time. This flexibility can benefit both landlords and tenants—landlords gain predictable rent increases, while tenants can plan their budgets for these increments in advance. The scheduled rises might be based on various factors such as inflation rates or overall market trends, making it easier for tenants to understand their future financial obligations. While fixed rent throughout the lease term provides stability, it doesn't account for changing economic conditions. Rent that decreases over time is less common, as it doesn't typically reflect the market dynamics businesses face. Similarly, contingent rent, which is only paid when sales exceed a specific limit, is a different structure often referred to as a percentage lease rather than a graduated lease. This illustrates the fundamental feature of the graduated lease as a mechanism for gradual rent increases rather than fixed or contingent structures.