Step rent

Step rent, also known as graduated rent or escalating rent, is a lease agreement provision that specifies pre-determined rent increases at set intervals throughout the lease term. Instead of remaining constant, the rent amount "steps up" according to a defined schedule.

The rent increases are typically expressed as a fixed dollar amount or a percentage of the previous rent. The frequency of these increases is also pre-determined and can be annual, bi-annual, or based on any other agreed-upon timeframe.

Step rent clauses are often included in longer-term leases to account for factors such as inflation, rising operating costs, and increasing property value. Both the landlord and the tenant benefit from the predictability offered by step rent. Landlords gain assurance of increased income over time, while tenants have the advantage of knowing the exact future rent amounts, aiding in budgeting and financial planning.

Negotiating step rent involves determining the appropriate increase amounts and frequency, taking into consideration market conditions, inflation expectations, and the overall value of the lease agreement. The specifics of the step rent clause are crucial and should be clearly outlined in the lease document to avoid future disputes.