Graduated Lease Agreement
A Graduated Lease Agreement is a type of lease contract in which the rental payments increase at predetermined intervals over the term of the lease. This agreement outlines specific dates when the rent will rise and by how much, allowing both the landlord and tenant to plan for future financial obligations.
Typically, the Graduated Lease Agreement is structured to provide a lower initial rent that escalates at regular intervals, which can be advantageous for tenants who may anticipate increased income over time. For instance, a common structure may involve an initial rent set at $1,000 per month for the first year, followed by increases to $1,200 in the second year and $1,400 in the third year.
This type of lease is often used in commercial real estate, where businesses may expect growth and want to manage their initial costs. It can also be beneficial in residential leases, particularly for long-term tenants who may negotiate terms that reflect their anticipated income trajectory or business plans. However, tenants should carefully consider the implications of rising rent and ensure that they can meet future payment obligations without undue hardship.
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