Which lease structure requires the tenant to pay a lease cost that covers the landlord's debt service and profit?

• A. Ground lease
• B. Triple-net lease
• C. Modified gross lease
• D. Gross lease

Answer: (B)

In a triple-net lease the tenant takes on most of the property’s ongoing costs. The tenant pays base rent plus the major operating expenses—property taxes, insurance, and maintenance. Because these costs are passed through to the tenant, the overall lease price is set so that it covers not only those operating expenses but also the landlord’s financing costs and desired return. In other words, the tenant’s payments are structured to fund the landlord’s debt service and profit through the rent and pass-through charges. This is why triple-net leases are described as shifting the cost burden onto the tenant and tying the rent to the landlord’s ongoing costs, including debt service. Other lease types either place more of those costs on the landlord (gross lease) or mix costs differently (modified gross, ground lease), so they don’t align with the same pass-through of debt service and profit.