The "prevailing market rate" clause refers to a contractual agreement where the payment or pricing is determined based on the current average rate for similar goods or services in the relevant market at the time of the transaction or service. This clause ensures that the pricing remains fair and competitive by aligning with existing market conditions, accommodating fluctuations over the duration of the contract.
A. During the Fourth Extension Term, (a) the Base Rent rate per rentable square foot shall be equal to the Prevailing Market rate per rentable square foot; (b) Base Rent shall increase, if at all, in accordance with the increases assumed in the determination of Prevailing Market rate; and (c) Base Rent shall be payable in monthly installments in accordance with the terms and conditions of the Lease, as amended.
C. Adjustment. If the Prevailing Market rate has not been determined by the commencement date of the Fourth Extension Term, Tenant shall pay Base Rent for the Fourth Extension Term upon the terms and conditions in effect during the last month ending on or before the expiration date of the Lease until such time as the Prevailing Market rate has been determined. Upon such determination, the Base Rent for the Fourth Extension Term shall be retroactively adjusted. If such adjustment results in an under- or overpayment of Base Rent by Tenant, Tenant shall pay Landlord the amount of such underpayment, or receive a credit in the amount of such overpayment, with or against the next Base Rent due under the Lease.
10.5. Definition of Prevailing Market. For purposes of this Fourth Extension Option, “Prevailing Market” shall mean the arms-length, fair-market, annual rental rate per rentable square foot under extension and renewal leases and amendments entered into on or about the date on which the Prevailing Market is being determined hereunder for space comparable to the Premises in the Building and office buildings comparable to the Building in the San Jose, California area. The determination of Prevailing Market shall take into account (i) any material economic differences between the terms of the Lease and any comparison lease or amendment, such as rent abatements, construction costs and other concessions, and the manner, if any, in which the landlord under any such lease is reimbursed for operating expenses and taxes; (ii) any material differences in configuration or condition between the Premises and any comparison space, including any cost that would have to be incurred in order to make the configuration or condition of the comparison space similar to that of the Premises; and (iii) any reasonably anticipated changes in the Prevailing Market rate from the time such Prevailing Market rate is being determined and the time such Prevailing Market rate will become effective under the Lease.
"Prevailing Market Rate" for the Premises shall mean the rental that Landlord would be able to obtain from a third party desiring to lease the Premises for the Extended Term taking into account the age of the Building, the size, location and floor levels of the Premises, the quality of construction of the Building and the Premises, the services provided under the terms of this Lease, the rental then being obtained for new leases of space comparable to the Premises in the locality of the Building, and all other factors that would be relevant to a third party desiring to lease the Premises for the Extended Term in determining the rental such party would be willing to pay therefor, including free rent, tenant improvement allowances, leasing commissions and signing bonuses. Prevailing Market Rate shall be determined based on new rentals for similar space with standard tenant improvement allowances and standard leasing commissions. No later than one hundred twenty (120) days prior to commencement of the Extended Term, Landlord shall notify Tenant of Landlord's determination of the Prevailing Market Rate to be used to calculate the annual rent for the Extended Term. If Tenant wishes to dispute Landlord's determination, Tenant shall give notice to Landlord of Tenant's intent to submit the matter to the appraisal process described below within twenty (20) days after receipt of notice of Landlord's determination. If Tenant so elects, then within fifteen (15) days after the date of Tenant's notice of its election to submit the matter to the appraisal process, each party, at its cost, shall engage a real estate appraiser or commercial real estate broker (together “appraisers”) to act on its behalf in determining the Prevailing Market Rate for the Premises for the Extended Term. The appraisers shall have at least five (5) years’ commercial experience in the metropolitan area in which the Buildings are located. If a party does not appoint an appraiser within fifteen (15) days after the other party has given notice of the name of its appraiser, the single appraiser appointed shall be the sole appraiser and shall set the Prevailing Market Rate for the Premises for the Extended Term. If the two appraisers are appointed by the parties as stated in this Section 2.6, such appraisers shall meet promptly and attempt to set the Prevailing Market Rate for the Premises for the Extended Term. If such appraisers are unable to agree within thirty (30) days after appointment of the second appraiser, if the lower appraisal is ninety percent (90%) or more of the higher appraisal, then fifty percent (50%) of the difference shall be added to the lower appraisal and that total shall be the Prevailing Market Rate. If the lower appraisal is less than ninety percent (90%) of the higher appraisal, the appraisers shall elect a third appraiser meeting the qualifications stated in this paragraph within ten (10) days after the last date the two appraisers are given to set the Prevailing Market Rate for the Premises. The cost of the third appraiser shall be apportioned equally between Landlord and Tenant. Within thirty (30) days after the selection of the third appraiser, the third appraiser shall render a separate appraisal. The rental values and terms arrived at by the three appraisers shall be averaged, and the resulting average shall be deemed the Prevailing Market Rate for the Premises for the Extended Term. However, in the event that the Prevailing Market Rate arrived at in any of the appraisals is more than ten percent (10%) higher or lower than the middle appraised Prevailing Market Rate, such high or low appraisal or appraisals shall be discarded and the remaining two appraised values shall be averaged, if there are two, or the remaining one appraised value shall be used, if there is one. If either by agreement of the parties or by appraisal the Prevailing Market Rate is not finally determined by the commencement of the Extended Term, then Tenant shall make monthly payments of Base Rent at the rate equal to the mathematical average of the rate designated by Landlord and the rate proposed by Tenant’s appraiser, until such time as the Prevailing Market Rate is finally determined by agreement of the parties or by an appraiser. If the monthly Prevailing Market Rate as finally determined for the Extended Term exceeds the monthly amount previously paid by Tenant for the Extended Term, Tenant shall forthwith pay the difference to Landlord for each of the months Tenant paid the lesser amount within thirty (30) days of the determination of the Prevailing Market Rate. If the monthly Prevailing Market Rate as finally determined for the Extended Term is less than the monthly amount previously paid by Tenant for the Extended Term, Landlord shall forthwith pay the difference to Tenant for each of the months Tenant paid the greater amount within thirty (30) days of the determination of the Prevailing Market Rate.
A. Landlord’s Notice. Within 30 days after receiving the Extension Notice, Landlord shall give Tenant written notice (“Landlord’s Notice”) stating Landlord’s estimate of the Prevailing Market rate for the Extension Term. Tenant, within 15 days thereafter, shall give Landlord either (i) written notice (“Tenant’s Binding Notice”) accepting Landlord’s estimate of the Prevailing Market rate for the Extension Term stated in Landlord’s Notice, or (ii) written notice (“Tenant’s Rejection Notice”) rejecting such estimate. If Tenant fails to timely respond, Tenant will be deemed to have delivered Tenant’s Binding Notice. If Tenant gives Landlord a Tenant’s Rejection Notice, Landlord and Tenant shall work together in good faith to agree in writing upon the Prevailing Market rate for the Extension Term. If, within 30 days after delivery of a Tenant’s Rejection Notice (the “Negotiation Period”), the parties fail to agree in writing upon the Prevailing Market rate, each party shall make and deliver to the other separate determination of the Fair Market Rent within five (5) business days following the date of expiration of the Negotiation Period, and such determinations shall be submitted to arbitration in accordance with Section 10.3.B below (for avoidance of doubt, the separate determination of Prevailing Market rate made by each party may differ from any other statement or determination of Prevailing Market rate previously made by such party).
(iii) The three arbitrators shall, within thirty (30) days following the appointment of the Neutral Arbitrator, reach a decision as to whether Landlord’s or Tenant’s submitted determination of Prevailing Market rate most closely reflects the Prevailing Market rate for the Premises (the decision of a majority of the three arbitrators shall be binding), and shall notify Landlord and Tenant of such decision.
(vii) In the event that the Prevailing Market rate has not been determined as described above as of the commencement of the Extended Term, then as of the commencement of the Extension Term, Tenant will pay an amount equal to the Prevailing Market rate determination initially submitted by Landlord to Tenant, and upon the final determination of the Prevailing Market rate, the payments made by Tenant shall be reconciled with the actual Prevailing Market rate due, and the appropriate party shall make any corresponding payment to the other party.
(b) If Tenant exercises either of its options to extend the Term, Landlord shall, within thirty (30) days after receipt of Tenant’s exercise notice, notify Tenant in writing of Landlord’s reasonable determination of the Base Rent (including increases) for the Premises for the applicable ten (10) year option period, which amount shall be ninety-five percent (95%) of the Prevailing Market Rate for such space (as hereafter defined). Tenant shall have thirty (30) days from its receipt of Landlord’s notice setting forth Landlord’s determination of Base Rent to notify Landlord in writing that Tenant (i) withdraws its election to exercise the option, or (ii) agrees with Landlord’s determination of the Base Rent, or (iii) does not agree with Landlord’s determination of the Base Rent and that Tenant elects to determine the Prevailing Market Rate (as hereafter defined) in accordance with the procedure set forth below. If Tenant does not so notify Landlord in writing within thirty (30) days of its receipt of Landlord’s notice, Base Rent for the Premises for the applicable extended term shall be the Base Rent set forth in Landlord’s notice to Tenant. The phrase “Prevailing Market Rate” shall mean one hundred percent (100%) of the then prevailing market rate for the twelve (12) month period prior to Tenants’ renewal notice for base rent for a ten (10) year term calculated on a per rentable square foot basis for leases covering buildings comparable to the condition of the Premises (including the Initial Tenant Improvements and any subsequent Alteration made by Tenant) in projects similar to the Project located in central and northern New Jersey (hereinafter referred to as the “Market Area”), and taking into account all other relevant factors, including but not limited to rent concessions and liability for common area maintenance. The Prevailing Market Rate shall be determined by an appraisal procedure as follows:
In the event that Tenant notifies Landlord that Tenant disagrees with Landlord’s determination of the market rate and that Tenant elects to determine the Prevailing Market Rate, then Tenant shall specify, in such notice to Landlord, Tenant’s selection of a real estate appraiser, who shall act on Tenant’s behalf in determining the Prevailing Market Rate. Within twenty (20) days after Landlord’s receipt of Tenant’s selection of a real estate appraiser, Landlord, by written notice to Tenant, shall designate a real estate appraiser, who shall act on Landlord’s behalf in the determination of the Prevailing Market Rate. Within twenty (20) days of the selection of Landlord’s appraiser, the two (2) appraisers shall render a joint written determination of the Prevailing Market Rate. If the two (2) appraisers are unable to agree upon a joint written determination within said twenty (20) day period, the two appraisers shall select a third appraiser within such twenty (20) day period. Within twenty (20) days after the appointment of the third appraiser, the third appraiser shall render a written determination of the Prevailing Market Rate by selecting, without change, the determination of one (1) of the original appraisers as to the Prevailing Market Rate and such determination shall be final, conclusive and binding. All appraisers selected in accordance with this subparagraph shall have at least ten (10) years prior experience in the commercial leasing market of the Market Area and shall be members of the Appraisal Institute or similar professional organizations. If either Landlord or Tenant fails or refuses to timely select an appraiser, the other appraiser shall alone determine the Prevailing Market Rate. Landlord and Tenant agree that they shall be bound by the determination of the Prevailing Market Rate pursuant to this paragraph. Landlord shall bear the fee and expense of its appraiser, Tenant shall bear the fee and expenses of its appraiser, and Landlord and Tenant shall share equally the fee and expenses of the third appraiser, if any.
The initial term of the Lease will commence on February 1, 2024, and the duration of the initial term will be 63 months. If the premises are not delivered on or before March 1, 2024, Rani LLC may terminate the Lease, subject to certain conditions that could delay such date to March 31, 2024. Subject to certain conditions, Rani LLC will have an option to renew the Lease for one additional 5-year term at the then-prevailing market rate.
(b) The term “Prevailing Market Rate” as used in this Paragraph IX shall be the prevailing annual rental rates that a new or existing tenant would pay and a landlord would accept in an arm’s length, bona fide negotiation for a lease of subject premises to be executed at the time of determination and to promptly commence thereafter, based upon other transactions in other comparable first class office buildings, including the Building, in the West Houston and Energy Corridor submarket area in Houston, Texas within the nine (9) months immediately preceding the notice date, taking into consideration all relevant terms and conditions including, age, location and quality of the building, floor level and location on the floor, use and size of the space in question, definition of Rentable Area, extent of existing leasehold improvements, leasehold improvement allowances to be provided, rental abatement, lease takeovers and assumptions, moving allowances and other concessions, term of lease, parking ratio, extent of services to be provided, base year or figure of escalation purposes, adjustments to base rental, the time the particular rental rate under consideration became or is to become effective, and any other relevant term or condition, including, without limitation, the credit strength of the tenant and any guarantor.
(c) If by the end of the thirty (30) day period referred to in this Paragraph IX(a) the parties have not reached agreement then upon Tenant timely notifying Landlord as required by this Paragraph IX(a), the Prevailing Market Rate for the applicable Extension Term shall be determined by arbitration pursuant to the following procedures: Landlord and Tenant shall each appoint a broker with a minimum of ten (10) years of experience negotiating leases of similar size in similar quality and type buildings who is knowledgeable in building rates and terms in the area in which the Leased Premises are located, and the two brokers shall, within ten (10) business days after their selection, designate in writing their respective determinations of Prevailing Market Rate and agree upon and appoint an independent third broker with the same qualifications. The third broker shall decide whether Landlord’s or Tenant’s broker’s determination of Prevailing Market Rate is closest to the true Prevailing Market Rate within ten (10) business days after the third broker’s appointment. This determination of Prevailing Market Rate by the third broker shall be binding on both Landlord and Tenant. Landlord and Tenant shall each bear the cost of its broker and shall share equally the cost of the third broker.
The prevailing market rate refers to the current average rate for a good, service, or asset that is exchanged in competitive market conditions. This rate reflects the supply and demand dynamics at a particular time and can vary based on location, quantity, and quality of the product or service. It is commonly used in contract negotiations and legal contexts to ensure that compensation or pricing is fair and aligned with market conditions.
You should use the prevailing market rate in situations where:
Using prevailing market rates helps to ensure agreements are equitable and are typical for similar transactions under normal market conditions.
When writing about or including the prevailing market rate in a document, you should:
For example:
“The consultant’s fee shall be based on the prevailing market rate for similar services, as determined at the time of contract renewal, and shall be referenced against the latest data provided by the Industry Professional Association’s quarterly report.”
Contracts that typically include provisions for the prevailing market rate are:
Including the prevailing market rate in these contracts helps to maintain fairness and adaptability in dynamic market environments.
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A price escalation clause is a contractual provision that allows for the adjustment of the contract price in response to changes in market conditions or specific cost factors, such as inflation or increased material costs. This clause is typically implemented to ensure both parties can manage financial risks when costs fluctuate beyond their control.
A pricing grid clause outlines a structured framework for determining the cost of goods or services based on specific variables, such as volume, tiers, or market conditions. It provides clarity and flexibility in pricing by aligning costs with predefined criteria, ensuring transparency and adjustability over the contract's duration.
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