A rent escalation clause is a provision in a lease agreement that allows for periodic increases in the rental amount, often tied to specific benchmarks like inflation indices, market rates, or predetermined schedules. This clause ensures that rental income keeps pace with rising costs or market conditions over the lease term.
The initial base rent under the Lease is $7,500,000 per annum, payable in monthly installments of $625,000, and escalating 1.5% on January 1st, 2023 (the “Rent Escalation Date”) and subsequently 1.5% per year on each anniversary of the Rent Escalation Date. During the term of the Lease, 220 Alhambra will have the right to sublet the whole or any part of the Property.
Labeled “FIP Rent Escalation Reconciliation_6.30.2023_2023-2.xlsx” and the corresponding record layout and decode information, as applicable (the “FIP Rent Escalation Reconciliation”), that the Property Manager, on behalf of the Issuers, indicated contains information relating to the current monthly rent Sample Characteristic (as defined below) for each 2023-2 Property and Lease,
Approximately 95% of our leases had contractually fixed rent escalation provisions, approximately 4% of our leases had rent escalation provisions linked to the CPI and approximately 1% of our leases had no rent (or flat) escalation provisions, in each case based on annualized base rent as of March 31, 2021.
In the event Tenant fails to obtain all necessary Operations Permits and commence regular use and operations within the First Floor Expansion Premises on or before the Permit Outside Date (as the same may be extended as provided in Section 7(a) above), then notwithstanding anything to the contrary contained in Section 2(a) above, (i) commencing on the day immediately following the Permit Outside Date, Base Rent for the First Floor Expansion Premises shall be 102% of the Base Rent owing for the First Floor Expansion Premises on the day prior to the Permit Outside Date and (ii) on October 1 of each year during the Term thereafter occurring, Base Rent for the First Floor Expansion Premises shall increase by 5% in lieu of the 3% annual increases reflected in the rent table set forth in Section 2(a) above. The increases described in subclauses (i) and (ii) in this Section 7(b) are referred to herein as a “Rent Escalation”).
Exercise of Host’s option to extend is subject to certain conditions, including the existence of no defaults and subject to any applicable rent escalation or rent re-negotiation provisions.
(iii) On the first (1st) day following six (6) full calendar months after the Success Fee Payment Due Date (“Second Base Rent Escalation Date”), Base Rent shall increase to TWO HUNDRED EIGHTY THOUSAND AND 00/100 US DOLLARS ($280,000.00) per month. For purposes of clarity, if the Success Fee Triggering Event occurs on June 6, 2022, the Second Base Rent Escalation Date shall be January 1, 2023.
The annual rental income on the Lease is $1,224,835. The Lease expires on August 31, 2031, subject to two five-year options to extend, with a rent escalation of 5% per extension term. The total purchase price of the Property was $21,301,478.
This rent will increase on January 1, 2024 and each anniversary of such date by 2.25% per annum, and the Company will pay a make-whole payment to the Landlord (based on foregone monthly escalated rent) to delay rent escalation from the anniversary of Lease commencement to the following January 1.
The lease has a term ending on May 31, 2042. The yearly rent is $1,072,500 and the lease contains a standard rent escalation clause. SolAero has the right to extend the lease for up to two separate ten year periods.
The Lease expires on August 31, 2031, subject to two five-year options to extend, with a rent escalation of 5% per extension term.
Some of the Company’s leases include rent escalations based on inflation indexes and fair market value adjustments. Certain leases contain contingent rental provisions that include a fixed base rent plus an additional percentage of the restaurant’s sales in excess of stipulated amounts. Lease expense associated with rent escalation and contingent rental provisions is not material and is included within operating lease cost.
Rent escalation refers to a provision in a lease or rental agreement that allows landlords to periodically adjust the rent during the term of the contract. This adjustment is designed to account for factors such as inflation, market conditions, or increased property-related costs (like maintenance, property taxes, and insurance). The escalation ensures that landlords can maintain a fair rental income over time.
You should consider using a rent escalation clause in the following situations:
Writing an effective rent escalation clause requires clarity and precision. Here is a general structure you might follow:
Define the escalation method: Specify the method used to calculate the increase, such as a fixed percentage, a fixed amount, or based on an external index (e.g., Consumer Price Index).
Example: “The rent will increase by 3% annually.”
Frequency of escalation: Indicate how often the increase will occur (e.g., annually, bi-annually).
Example: “Rent escalation will occur annually on the anniversary of the lease start date.”
Cap or limit (if any): If there’s a maximum allowable increase, state it clearly.
Example: “The annual increase shall not exceed 5%.”
Notice requirement: Detail the notice period you will provide before implementing an increase.
Example: “The landlord will provide at least 30 days’ notice prior to the rent increase taking effect.”
Rent escalation clauses are often found in the following types of contracts:
Dive deeper into the world of clauses and learn more about these other clauses that are used in real contracts.
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