A graduated lease, also known as a step-up lease or graduated rental lease, is a type of lease agreement in which the rent payments increase at specified intervals over the term of the lease. This type of lease allows for gradual increases in rent, providing the landlord with a way to adjust the rental income to account for inflation, increased operating costs, or other factors affecting the property’s value.

Key features of a graduated lease include:

1. **Scheduled Rent Increases:** In a graduated lease, the lease agreement outlines a schedule of rent increases. These increases may occur annually or at other specified intervals. The schedule is agreed upon by both the landlord and the tenant and is typically expressed as a percentage increase or a fixed amount.

2. **Predictable Adjustments:** Graduated leases provide both landlords and tenants with a degree of predictability. Tenants know in advance when rent increases will occur and can plan for these changes. Landlords can use graduated leases to hedge against inflation or rising property costs.

3. **Types of Graduated Leases:**
– **Fixed Percentage Increase:** Rent increases are calculated based on a fixed percentage of the current rent. For example, a lease might specify a 3% annual increase.
– **Fixed Dollar Amount Increase:** Rent increases by a predetermined fixed amount at specified intervals. For instance, the lease might stipulate a $100 increase every two years.

4. **Negotiation:** The terms of a graduated lease are subject to negotiation between the landlord and tenant. Both parties may agree on the frequency and magnitude of rent increases during the lease term.

5. **Benefits for Landlords:** Graduated leases provide landlords with a way to protect the real value of their rental income against economic factors that could erode purchasing power over time. It allows them to keep the rental income in line with market conditions.

6. **Considerations for Tenants:** Tenants considering a graduated lease should carefully review the terms and schedule of rent increases to ensure that it aligns with their budget and financial expectations. Some tenants may prefer the stability of a fixed lease without scheduled increases.

It’s important for both parties to clearly understand and agree upon the terms of the graduated lease before signing the agreement. Legal advice may be sought to ensure that the lease complies with local laws and regulations. Additionally, the terms of graduated leases can vary, and parties should negotiate terms that suit their specific needs and circumstances.