Graduated Lease
A graduated lease in real estate is a type of rental agreement where the rent amount increases at predetermined intervals throughout the lease term. These intervals and the amount of increase are specified in the lease agreement and are typically based on a fixed schedule or tied to certain economic indicators.
Key features of a graduated lease include:
Fixed Schedule of Increases: Rent increases occur at specific times, such as annually or semi-annually.
Predefined Amounts: The amount of each increase is predetermined and outlined in the lease agreement, providing predictability for both the landlord and the tenant.
Adjustments Based on Economic Indicators: Sometimes, rent increases may be linked to economic indicators such as the Consumer Price Index (CPI), allowing the rent to adjust with inflation or market conditions.
Graduated leases are commonly used in commercial real estate to accommodate the anticipated growth in tenant revenue or to reflect increasing property values over time. They offer tenants the advantage of gradual rent increases rather than sudden spikes, while landlords benefit from a predictable increase in rental income.