Lease is an agreement by contract whereby possession and use of land is transferred (by a lessor to a lessee) for an agreed upon period of time under certain specified conditions. It is considered an interest in real property. The property which has a lease is called a leasehold.

Below are types of real estate leases:

Graduated Lease

A lease which provides for a varying rental rate, such as a rental rate that increases or decreases in measured steps. Often based on some future determination, such as a periodic appraisal of the property.

Ground Lease

An agreement for the use of the land only, sometimes secured by improvements placed on the land by the user. Usually a net lease.

Gross Lease

A lease agreement in which the tenant pays one constant payment, with no additions for the landlord's operating expenses. However, gross leases--which are the most common type for residential properties--does not include tenant utilities, unless specifically stated in the lease.

Master Lease

A lease that allows the renter (master lessee) to relet the property to other renters. The master lessee is responsible for management and marketing the properties. Typically, the owner or master lessor is guaranteed a regular installment regardless of how well the master lessee is performing. The master lessee (renter) assumes all of the risk; however, the owner (master lessor) receives much less than if he or she were to manage the property directly.

Net Lease

A lease arrangement that assesses the tenant with a base rent plus an additional assessment for the tenant's share of building operating expenses (CAM), insurance or real estate taxes. Net leases are either Single-Net, Double-Net (NN) or Triple-Net (NNN), depending on the number of expenses (CAM, insurance or taxes) that the lessee must pay.

Percentage Lease

A lease in which the rent is computed as a percentage of the gross business of the tenant. Ranges from under 2% for supermarkets and discount stores to over 50% for parking lots. Such an arrangement would require continuous and full financial disclosure by the tenant of the tenant's business activities. This may be either a gross lease or net lease arrangement, but there is usually a minimum rent amount and a recapture clause allowing the lessor to reclaim the property if minimum sales are not met.

Sandwich Lease

In a subletting situation, the original lease between the lessor (landlord) and the initial lessee (tenant) is sometimes called a sandwich lease. Legally, that lease is held by the initial tenant. Thus, that tenant's lease rights are sandwiched between the lease rights of the subtenant and the ownership rights of the landlord.


A lease given by a lessee. The original lessee is in the middle and is both a lessor to the new lessee and a lessee under the original lease.

Overage Lease

A lease arrangement that collects additional charges from the tenant, based on a percentage of sales that a tenant generates above a specified sales base. Shopping malls will sometimes use this arrangement as an incentive for the mall director to pursue optimum traffic to the center.


  • Own it real estate dictionary by William E Keeler - ISBN-13: 978-1503070349

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