Select Page

A graduated lease agreement is a type of leasing contract where the rent increases gradually over a specific period. The increase in the rental amount is predetermined in the agreement and typically occurs annually.

Graduated lease agreements are common in commercial real estate, where long-term rental agreements are common. The gradual increase in rent helps to offset the inflationary cost of maintaining and managing the property. This type of lease agreement is preferred by landlords who seek to minimize their risk by ensuring they receive a fair return on their investment.

In a graduated lease agreement, the tenant agrees to pay a specific rent at the time of the lease signing. The contract also includes the details of the rental income increase over the term of the lease. This increase is based on a predetermined formula, which could be a percentage of the initial rental or a fixed amount.

Graduated lease agreements offer several benefits to both landlords and tenants. For the tenant, this lease type provides an opportunity to budget and plan for the future. The tenant knows the rental increase percentage, which makes it easier to budget for future costs. Conversely, landlords benefit from steady rental income that increases over time, helping them to offset the costs of maintaining and managing the property.

However, there are also some potential drawbacks to a graduated lease agreement. Tenants may find it challenging to plan for budgeting since the rental increase is not constant. The rent increase could also be higher than expected, making it difficult for tenants to keep up with their payments.

In conclusion, graduated lease agreements are a popular option for commercial real estate leasing. The gradual increase in rental income both benefits landlords and tenants, providing steady rental income for landlords and a predictable budgeting schedule for tenants. However, both parties should carefully consider the potential drawbacks before signing a graduated lease agreement.