Question

1. In a modified gross lease…

		A. the owner pays all expenses.
		B. the owner pays all expenses and tenants reimburse the owner for expenses in excess their expense stops.
		C. tenants pay only utilites, property taxes, and casualty insurance premiums.
		D. tenants pay all expenses.

2. Net operating income (NOI) represents...

		A. revenues from operations less operating expenses.
		B. the cash flows available for distribution to financial claimants.
		C. both of the above.
		D. neither of the above.

3. Effective Gross Income is determined by Potential Gross Income after adjusting for ...

		A.operating expenses
		B. expense reimbursements.
		C. vacancy.
		D. tenant improvements.

Answer 1

1. Option (B) is correct

In a modified gross lease, the owner pays all expenses and tenants reimburse the owner for expenses in excess their expense stops. The quota or proportion or types of expenses to be incurred by landlord and tenant is decided in advance usually by making the agreement. Property taxes and major repairs are carried out by landlords while ordinary repairs, insurance premiums etc are paid by tenant.

Option (A) is incorrect as owner do not pay all expenses.

Option (C) is incorrect as usually property taxes are paid by landlords and the expenses to be paid are decided by the agreement.

Option (D) is incorrect as tenant do not pay all expenses.

2. Option (A) is correct

Net operating income represents revenue from operations less operating expenses. These include revenues and expenses of principal revenue producing activities thereby excluding the other incomes and other expenses.

3. Option (C) is correct

Effective gross income is determined by potential gross income after adjusting for vacancy.