Escalation of rent tied to a published index means the landlord's income:
Correct Answer
C) Adjusts with the index rather than by fixed steps
Why this is correct: An index clause (e.g., tied to CPI) means rent adjustments are not fixed amounts or dates but fluctuate with changes in the published index. This transfers inflation risk to the tenant, as noted in the explanation. Why the other choices are wrong: Rent tied to sales volume describes a percentage lease. The income does not remain constant; it adjusts with the index. The payment structure (e.g., paid in advance) is separate from the escalation clause. Exam tip: Index clause = variable, uncertain future income based on an external economic measure.
Why This Is the Correct Answer
Why this is correct: An index clause (e.g., tied to CPI) means rent adjustments are not fixed amounts or dates but fluctuate with changes in the published index. This transfers inflation risk to the tenant, as noted in the explanation. Why the other choices are wrong: Rent tied to sales volume describes a percentage lease. The income does not remain constant; it adjusts with the index. The payment structure (e.g., paid in advance) is separate from the escalation clause. Exam tip: Index clause = variable, uncertain future income based on an external economic measure.
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