What is an index lease?

Index Lease Definition

An index lease is a type of lease agreement where the rental amount is periodically adjusted based on a specified index. Commonly, the Consumer Price Index (CPI) is used as the benchmark. This index reflects changes in the cost of living, and as such, the rent in an index lease will increase or decrease in accordance with fluctuations in the CPI or another agreed-upon index. This type of lease provides a way for landlords to ensure that the rent keeps pace with inflation, protecting the rental income's value over time, while also offering tenants transparency and predictability in future rent adjustments.