Ace the Arizona Real Estate Exam 2026 – Unlock Your Property Dreams!

The situation described indicates that Peter pays a fixed monthly rent of $800 along with a percentage of his profits. This type of agreement is characteristic of a percentage lease, which is commonly used in retail environments. In a percentage lease, the tenant pays a base rent, which is usually lower than that of a traditional lease, and then agrees to pay a percentage of their sales or profits to the landlord. This structure helps align the interests of both the landlord and the tenant, as the landlord benefits from the tenant's success, while the tenant has the potential for lower fixed costs.

Other types of leases mentioned do not fit this scenario. For example, a graduated lease includes predetermined increases in rent over time but does not tie rental payments to sales or profits. A ground lease typically involves leasing land for an extended period, allowing the tenant to develop buildings but is not tied to sales percentages. An index lease uses an index, such as the Consumer Price Index, to adjust rents over time rather than linking them to sales or profits. Thus, the arrangement described aligns most closely with the characteristics of a percentage lease.