In which lease is rent tied to an external standard such as the cost of living, CPI, or prime lending rate?

• A. Escalated Lease
• B. Index Lease
• C. Reappraisal Lease
• D. Ground Lease

Answer: (B)

Rent that changes based on an outside economic measure is called an index lease. The idea is that the landlord and tenant agree to use a published index—such as the cost of living, CPI, or even the prime lending rate—to determine how much rent increases at each adjustment. This ties the rent to real-world economic conditions, so the payment scales with inflation or other shifts in the economy rather than following a fixed schedule.

Escalated leases rely on predetermined increases or fixed escalators, not on an external index. Reappraisal leases adjust rent based on a new valuation of the property, not an outside index. Ground leases involve renting land and may have fixed or alternative payment structures, but they aren’t inherently tied to an external economic indicator.