Where this fits on the exam
| Official syllabus topic | Leases and Leasehold Estates |
|---|---|
| Official PSI area | Contracts |
| Published area weight | 19% of the national portion |
| Exam portion | National salesperson portion |
| Source edition | PSI Georgia Candidate Information Bulletin dated July 1, 2026 |
The Rule
PSI publishes the weight for the complete content area, not a fixed question count for this lesson. Learn the rule well enough to apply it when PSI changes names, numbers, or parties in a new scenario.
The lesson
Leasehold estates
Classify by duration and termination method. Despite its name, an estate for years can last any definite period, including days or months.
Lease terms
A lease addresses premises, duration, rent, deposits, maintenance, repairs, utilities, permitted use, entry, insurance, default, renewal, and surrender.
Assignment and sublease
An assignment transfers the tenant's remaining leasehold interest, while a sublease transfers less than the full remaining interest. Original-party liability depends on consent, release, and law.
Property types
Residential, commercial, percentage, ground, net, and gross leases allocate rent and operating costs differently. Federal and state rules can add mandatory protections.
Rent and expense allocation
A gross lease generally places specified operating expenses with the landlord. A net lease shifts specified expenses to the tenant, often taxes, insurance, or maintenance; the document defines which. A percentage lease adds rent tied to business sales. A ground lease primarily leases land. Labels do not replace reading the expense clause.
Lease-purchase and lease-option
A lease-purchase includes an obligation to buy under agreed terms, while a lease-option gives a choice to buy if properly exercised. Rent credits, deposits, purchase price, financing, defaults, and deadlines must be stated. Occupancy does not by itself transfer legal title.
Decision rule
Georgia-specific distinction
Worked example
Scenario. A tenant with ten months left transfers the entire remaining term to a new occupant but receives no release from the landlord.
Reason it through. The tenant transferred all remaining leasehold time, which is an assignment, but no fact releases the original tenant.
Answer. It is an assignment, and the original tenant may remain liable.
Common exam traps
- Assuming estate for years must last years
- Calling every transfer a sublease
- Assuming assignment releases the tenant
- Confusing possession with title
Original practice questions with detailed explanations
These questions were written for instruction and mapped to the current outline. They are not copied from PSI or any live examination. Choose an answer before opening the explanation.
Question 1A tenant signs a lease for a vacation cottage running from June 1 through August 31. What leasehold estate is this?
- A. Periodic tenancy
- B. Tenancy at will
- C. Estate for years
- D. Tenancy at sufferance
Show answer and explanation →
Answer: C. Estate for years
An estate for years is any tenancy with a definite beginning and end date, however short. The name misleads candidates into choosing periodic tenancy, which renews for successive periods instead of ending on a fixed date.
- A. Incorrect. Periodic tenancies renew from period to period; this lease ends on a fixed date.
- B. Incorrect. A tenancy at will lacks the definite agreed term stated here.
- C. Correct. An estate for years has a definite term, even when that term lasts only three months.
- D. Incorrect. Sufferance involves holding over after a lawful right of possession ends.
Question 2After a one-year lease expires, the tenant stays on without the landlord's consent, and the landlord has not accepted any further rent. What does the tenant hold?
- A. Tenancy at sufferance
- B. Periodic tenancy
- C. Estate for years
- D. Tenancy at will
Show answer and explanation →
Answer: A. Tenancy at sufferance
A tenancy at sufferance arises when someone who entered lawfully stays after the right to possession ends, without the landlord's consent. Periodic tenancy is wrong because it needs the landlord's agreement to a continuing arrangement, which is missing here.
- A. Correct. The tenant entered lawfully but now holds over without consent.
- B. Incorrect. No accepted rent or other consent establishes a continuing periodic arrangement.
- C. Incorrect. The definite one-year term has already expired.
- D. Incorrect. A tenancy at will requires permission; the landlord has not consented.
Question 3With eight months left on a lease, a tenant lets a friend occupy the unit for the next three months and plans to move back in. The landlord gives no release. What is the transfer, and who stays liable to the landlord?
- A. An assignment, and only the friend is liable
- B. A sublease, and the original tenant stays liable
- C. A novation, and the landlord looks to the friend
- D. A sublease, and the original tenant is released
Show answer and explanation →
Answer: B. A sublease, and the original tenant stays liable
Transferring less than the full remaining term is a sublease, and without a release the original tenant remains liable on the lease. Calling it an assignment is the common error, since an assignment transfers the entire remaining term.
- A. Incorrect. The tenant transfers less than the entire remaining term, and no release removes the original liability.
- B. Correct. The tenant retains the last five months and remains responsible under the original lease.
- C. Incorrect. The landlord has not agreed to substitute and release the original tenant.
- D. Incorrect. A sublease does not by itself release the original tenant.
Question 4A retail tenant pays $2,000 monthly base rent plus 5% of monthly sales above $40,000. Sales are $60,000 this month. What rent is due?
- A. $2,000 under a gross lease
- B. $3,000 under the stated percentage lease
- C. $5,000, using 5% of all sales
- D. $4,000 under a ground lease
Show answer and explanation →
Answer: B. $3,000 under the stated percentage lease
Percentage rent is 5% of the $20,000 above the breakpoint, or $1,000, plus $2,000 base rent.
- A. Incorrect. This omits the sales-based rent the lease requires.
- B. Correct. The agreed formula adds $1,000 percentage rent to the $2,000 base.
- C. Incorrect. The formula applies only above $40,000, not to every sales dollar.
- D. Incorrect. The sales formula does not describe leasing land alone or support a $4,000 total.
Question 5An office lease requires base rent plus the tenant's share of property taxes, insurance, and common-area maintenance. Which description best fits?
- A. A gross lease with all operating costs included
- B. A net lease with specified expenses shifted to the tenant
- C. A percentage lease based on store sales
- D. A ground lease because taxes relate to land
Show answer and explanation →
Answer: B. A net lease with specified expenses shifted to the tenant
The tenant pays stated operating expenses in addition to rent. This is a net arrangement; the actual expense terms control its extent.
- A. Incorrect. The specified expenses are extra rather than entirely included in base rent.
- B. Correct. The added tax, insurance, and maintenance obligations create the net expense allocation.
- C. Incorrect. No percentage of business sales is stated.
- D. Incorrect. Paying tax expenses does not make an office-space lease a land-only ground lease.
Question 6A tenant signs an agreement requiring purchase of the home in one year, subject to its stated financing contingency. A second tenant's agreement gives only a choice to purchase within one year. What is the main distinction?
- A. Both tenants must buy because both pay rent
- B. The first is lease-purchase; the second is lease-option
- C. The second tenant gets title immediately
- D. The first tenant owns the home as soon as the lease begins
Show answer and explanation →
Answer: B. The first is lease-purchase; the second is lease-option
An obligation to purchase differs from an option to choose. Both agreements require careful review of conditions and exercise deadlines.
- A. Incorrect. Rent alone does not impose the second tenant's purchase obligation.
- B. Correct. The first contract creates an obligation subject to its conditions; the second grants an election.
- C. Incorrect. An unexercised option does not itself transfer legal title.
- D. Incorrect. A promise to buy later does not replace delivery and acceptance of the deed.
Ready to move on?
You are ready for the next lesson when all of these are true.
- Explain Leases and Leasehold Estates in one clear answer without notes.
- Separate Leasehold estates from Lease terms using a fresh example.
- Apply the decision rule to a new fact pattern and name the fact that controls the result.
- State the Georgia-specific point or explain why the national rule applies unchanged.
- Answer every practice question and explain the rule each rejected option misapplies.
- Revisit this topic later in mixed practice without category labels.
Recommended next lesson
Continue with Agency relationships and fiduciary duties. The agency and fiduciary duties article pulls the agency lessons together with a set of check-yourself questions on who the client is and what each duty forbids, which is the same analysis a property manager applies when acting for a landlord.
Return to the Contracts hub to see every official branch and the complete lesson sequence for this content area.