A commercial lease contains a 'rent escalation clause' that ties annual rent increases to changes in the Consumer Price Index (CPI). In a year when the CPI increases by 4 percent, what happens to the tenant's rent?
Correct Answer
C) The rent increases by 4 percent in accordance with the CPI escalation clause
A CPI-based rent escalation clause automatically adjusts the rent upward by the same percentage as the CPI increase. This protects the landlord's rental income from inflation erosion.
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Related Topics & Key Terms
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Related Concepts
In a cooperative (co-op), the building is owned by a corporation, and residents purchase shares of stock in the corporation that entitle them to a proprietary lease on a specific unit. Residents are shareholders, not property owners.
Fee simple absolute is the highest and most complete form of property ownership, giving the owner unrestricted rights to use, possess, enjoy, and dispose of the property. It is of unlimited duration and fully inheritable.
Community property is a system where property acquired during a marriage is owned equally by both spouses.
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