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Property DescriptionMEDIUM11.8% of exam

Comparing leases on equivalent expense and use terms, which condition generally creates a positive rental advantage for the tenant?

Correct Answer

D) Contract rent is below current market rent

Below-market contract rent on equivalent expense and use terms creates a tenant rental advantage during the relevant enforceable term. Remaining duration, risks and other lease rights affect its present value. Landlord expense payment alone does not establish an advantage if the comparison terms differ, and below-market rent alone is not a universal formula for total market value of the leasehold.

Answer Options
A
The landlord pays all operating expenses
B
Contract rent exceeds current market rent
C
The lease has no remaining enforceable term
D
Contract rent is below current market rent

Why This Is the Correct Answer

Below-market contract rent on equivalent expense and use terms creates a tenant rental advantage during the relevant enforceable term. Remaining duration, risks and other lease rights affect its present value. Landlord expense payment alone does not establish an advantage if the comparison terms differ, and below-market rent alone is not a universal formula for total market value of the leasehold.

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