In an index lease, how is the rent typically altered?

In an index lease, the rent is typically altered based on a specific economic indicator, such as the Consumer Price Index (CPI) or another relevant benchmark. This mechanism allows the rental payments to fluctuate over time in accordance with changes in the broader economy. For example, if the cost of living rises and the CPI increases, the rent can also increase, reflecting the current market conditions and making it fairer for both landlords and tenants.

This approach is beneficial because it helps maintain the value of the rental income for landlords in the face of inflation or economic shifts, while also providing tenants with predictable adjustments related to real economic movements. Adjustments tied to a predetermined economic indicator establish a clear and objective basis for rent increases, as opposed to arbitrary changes or those solely based on negotiation.