What characterizes a graduated lease?

A graduated lease is characterized by the inclusion of predetermined periodic rent increases over the duration of the lease term. This structure allows both the landlord and tenant to have clarity regarding future rental costs, as the increases are laid out from the onset of the lease. This arrangement can help tenants plan their finances accordingly and manage cash flow, especially in commercial real estate where business revenues may vary over time.

By having a clear schedule for rent increases, both parties can avoid potential disputes regarding rent adjustments, enabling a smoother landlord-tenant relationship. Other options do not accurately reflect the nature of a graduated lease; for example, a lease with no increase in rent would instead be termed a flat lease, and a lease based on gross sales indicates a percentage lease rather than a graduated one. Similarly, provisions that pertain to property taxes are unrelated to the fundamental characteristics of a graduated lease.