Essential Lease Types and Terms for the Arkansas Real Estate Exam
Last updated: April 2026
For aspiring real estate professionals in the Natural State, mastering property management concepts and lease agreements is a crucial step toward licensure. The state specific portion of your exam will heavily test your knowledge of both general leasing principles and unique Arkansas landlord-tenant laws. Whether you plan to manage commercial properties in Little Rock or residential rentals in Fayetteville, understanding these concepts is non-negotiable. For a broader overview of your testing journey, be sure to review our Complete Arkansas Exam Guide.
Understanding Leasehold Estates
Before diving into specific lease contracts, the Arkansas real estate exam requires you to understand the four types of leasehold estates (also known as non-freehold estates). These define the tenant's right to occupy the property:
- Estate for Years: Despite the name, this estate lasts for any definite, fixed period of time (it could be six months or five years). It has a specific start and end date, and no notice is required to terminate it because the expiration date is already agreed upon.
- Periodic Tenancy (Estate from Period to Period): This lease automatically renews for set periods (e.g., month-to-month or year-to-year) until one party gives proper notice to terminate.
- Estate at Will: A tenancy with no fixed duration that can be terminated by either the landlord or the tenant at any time, given reasonable notice.
- Estate at Sufferance: This occurs when a tenant originally had lawful possession but stays past the lease expiration without the landlord's consent (a "holdover tenant").
Common Lease Types on the Exam
You will encounter several types of lease agreements on the national and state portions of your exam. The differences primarily revolve around how operating expenses (taxes, insurance, and maintenance) are distributed between the landlord (lessor) and tenant (lessee).
Gross Lease
In a gross lease, the tenant pays a fixed rental amount, and the landlord pays all property operating expenses, including taxes, insurance, and maintenance. This is the most common type of lease for residential apartments in Arkansas.
Net Lease (Single, Double, and Triple)
Net leases are standard in commercial real estate. In these agreements, the tenant pays a base rent plus a portion (or all) of the property's operating expenses.
- Single Net (N): Tenant pays rent + property taxes.
- Double Net (NN): Tenant pays rent + property taxes + insurance.
- Triple Net (NNN): Tenant pays rent + property taxes + insurance + maintenance. This is highly common in retail and industrial leasing.
Percentage Lease
Commonly used in retail environments, such as shopping malls, a percentage lease requires the tenant to pay a base rent plus a percentage of their gross business sales that exceed a certain threshold (the "breakpoint").
A tenant has a percentage lease with a base rent of $2,000 per month. The lease dictates they must pay 5% of all gross sales exceeding $40,000 in a given month. If the tenant's gross sales for December are $70,000, what is their total rent for that month?
Step 1: Find the overage amount ($70,000 - $40,000 = $30,000).
Step 2: Calculate the percentage of the overage ($30,000 × 0.05 = $1,500).
Step 3: Add to base rent ($2,000 + $1,500 = $3,500 total rent).
Typical Commercial Lease Distribution (%)
Arkansas-Specific Landlord-Tenant Laws
The Arkansas Real Estate Commission (AREC) places a strong emphasis on state-specific statutes. Arkansas has historically been considered a very "pro-landlord" state, though recent legislative changes have introduced new tenant protections. Pay close attention to these rules, as they are heavily tested.
Statute of Frauds
According to the Arkansas Statute of Frauds, any lease agreement that extends for a period of more than one year must be in writing to be legally enforceable. An oral lease for exactly one year or less is generally valid and enforceable in Arkansas, though proving its terms in court can be difficult.
Security Deposit Regulations (AR Code § 18-16-304)
Handling lease deposits correctly is just as critical as handling earnest money and escrow funds. In Arkansas, the law states:
- A landlord cannot charge a security deposit that exceeds the equivalent of two months' rent.
- Upon termination of the lease, the landlord has 60 days to return the security deposit to the tenant.
- If any portion of the deposit is withheld for damages or unpaid rent, the landlord must provide a written, itemized list of charges.
- Exam Trick: These security deposit rules only apply to landlords who own or manage six or more residential dwellings, or to properties managed by a third-party real estate agency/brokerage.
Failure to Vacate Law
Arkansas is unique in that it has a criminal eviction statute. Under the "Failure to Vacate" law (AR Code § 18-16-101), if a tenant fails to pay rent, the landlord can give them a 10-day written notice to vacate. If the tenant remains on the property after 10 days, they can be charged with a criminal misdemeanor and fined for each day they remain. Note: While this law has faced ongoing legal challenges, it remains a critical piece of Arkansas-specific real estate trivia you must know for the exam.
Habitability and Maintenance
Historically, Arkansas was the only state without an "implied warranty of habitability." However, Act 1052 of 2021 introduced minimum habitability standards. Landlords are now required to provide basic elements like functioning roofs, safe drinking water, and working locks. Property managers must understand these fiduciary and legal duties, which you can review in our guide on broker vs. agent responsibilities.
Continuing Your Education
Lease laws and property management regulations evolve. Once you pass your exam and begin practicing, you will need to stay abreast of legislative changes regarding evictions, deposit handling, and habitability standards. To keep your license active and stay updated on changing landlord-tenant laws, be sure to meet your continuing education requirements on time.
Frequently Asked Questions
What is the maximum security deposit a landlord can charge in Arkansas?
In Arkansas, a landlord cannot charge more than the equivalent of two months' rent for a security deposit. However, this law only applies to landlords who own six or more rental units or use a third-party property management company.
How long does an Arkansas landlord have to return a security deposit?
Under Arkansas law, a landlord has 60 days after the lease terminates and the tenant vacates the property to return the security deposit, along with an itemized list of any deductions made for damages or unpaid rent.
Are oral leases legally binding in Arkansas?
Yes, but only if the lease term is for one year or less. Under the Arkansas Statute of Frauds, any lease agreement exceeding one year must be in writing to be legally enforceable.
What is the difference between an assignment and a sublease?
In an assignment, the original tenant transfers 100% of their remaining leasehold rights to a new tenant, though they may still retain secondary liability unless released by the landlord. In a sublease, the original tenant transfers only a portion of their rights or space to a sublessee, and the original tenant remains primarily responsible to the landlord.
What is the Arkansas Failure to Vacate law?
It is a unique state law where a tenant who fails to pay rent and refuses to leave the property within 10 days of receiving a written notice to vacate can face criminal misdemeanor charges, rather than just civil eviction proceedings.
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