Arizona Real Estate Broker Exam — All Questions

What distinguishes an estate for years from a periodic tenancy?

• a.It arises only when rent is paid monthly
• b.It may be ended by either party at any time
• c.It has a fixed ending date and needs no notice✓
• d.It renews automatically unless notice is given

An estate for years runs for a definite, stated term and expires on its own at the end of that term, so no notice to quit is required. A periodic tenancy runs from period to period and renews automatically until one party gives the notice the law or the lease requires. A tenancy at will is the one either party may end at any time, and it is not defined by how often rent is paid.

In a gross lease, who pays the operating expenses of the property?

• a.The landlord, out of the rent received✓
• b.The property manager, from a reserve account
• c.The tenant and landlord, split equally by statute
• d.The tenant, in addition to base rent

Under a gross lease the tenant pays one rent figure and the landlord absorbs taxes, insurance and maintenance out of it. A net lease shifts one or more of those categories to the tenant on top of base rent, and a triple net lease shifts taxes, insurance and maintenance. Nothing in Arizona law imposes a statutory split, and a property manager's reserve is the owner's money held in trust.

What is the defining feature of a percentage lease?

• a.Rent varies with the tenant's gross sales✓
• b.Rent varies with an annual inflation index
• c.Rent varies with the landlord's operating costs
• d.Rent varies with the appraised value of the space

A percentage lease sets rent as a percentage of the tenant's gross sales, often above a stated breakpoint and usually on top of a base minimum rent. It is common in retail, where the landlord shares in the success of the location. Rent tied to an inflation index is an escalation clause, and rent tied to the landlord's costs is an expense pass-through in a net lease.

What is a ground lease?

• a.A lease of the ground floor of a commercial building
• b.A lease of farmland limited by statute to one year
• c.A lease that ends when the land is sold to a new owner
• d.A long-term lease of land on which the tenant builds✓

A ground lease lets a tenant lease land for a long term, typically decades, and erect and own improvements on it for the life of the lease, with the improvements usually reverting to the landowner at the end. The long term is what makes the tenant's investment in construction financeable. It has nothing to do with which floor is leased, and a sale of the land does not by itself end a lease.

How does an assignment of a lease differ from a sublease?

• a.An assignment releases the original tenant automatically
• b.An assignment transfers only part of the remaining term
• c.An assignment transfers the entire remaining interest✓
• d.An assignment requires no writing under the statute of frauds

An assignment transfers the whole of the tenant's remaining interest to the assignee, who comes into direct relationship with the landlord. A sublease transfers less than the whole, keeping a reversion in the original tenant, who remains the landlord's tenant. In neither case is the original tenant released from the covenants unless the landlord agrees to a novation, and both are interests in land within A.R.S. 44-101(6) when they run more than a year.