Which lease arrangement is commonly used when a property owner sells the asset and then leases it back to continue use?

• A. Sale & Leaseback
• B. Escalated Lease
• C. Index Lease
• D. Reappraisal Lease

Answer: (A)

This question is about a financing approach where an owner converts an owned asset into cash while still using it. In a sale and leaseback, the owner sells the asset to another party and immediately signs a lease to continue using it. This lets the owner unlock capital from the asset without interrupting operations or occupancy, since they remain the user under the lease terms.

The appeal of this arrangement is clear: it provides liquidity and frees up funds for other needs while preserving day-to-day use of the asset. It can also offer predictable, steady lease payments and potentially favorable financing implications, depending on the deal structure and accounting standards in place.

Other lease types don’t involve selling the asset and then leasing it back. An escalated lease simply has rent that increases over time. An index lease bases rent on a external index like the consumer price index, causing adjustments tied to economic changes. A reappraisal lease adjusts rent after a new appraisal of the asset. None of these arrangements transfers ownership and then leases the asset back for continued use, which is the defining feature of a sale and leaseback.