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Lease Question: CPI Rent Increase

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  • Lease Question: CPI Rent Increase

    Are these pretty standard in commercial leases or should I run away if I see one in the lease agreement?

  • #2
    Cpi

    ask the landlord to take out the CPI and replace with a fixed step increase, i.e. from $6/square foot in years 1-5 to $7/square foot in years 6-10. CPI has absolutely nothing to do with the cost of running the property. They should be willing to change it.

    I would suggest having an attorney review any lease prior to your signing it. You would be amazed what will be hidden in the fine print.

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    • #3
      yes, read the whole lease carefully, even the "boilerplate" language. I am a Commercial Real Estate Broker, and former brewer. CPI increases will cause your rent to soar. I would never let a client get into a lease like that.
      Also look at the holdover clause, which sets the rent if you stay past the lease period. It could be anywhere from 100 to 200% of your rent.
      Remember everything is negotiable.
      Use the services of a real estate broker, it does not cost anything. They can translate anything for you.
      Mike Lanzarotta
      Commercial Real Estate Broker
      finding space for breweries in Southern California
      former owner and brewer, Crown City Brewery, Pasadena CA

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      • #4
        Cpi

        To sign a lease with your increase pegged to the CPI (consumer price index) is to peg your increase to the rate of inflation. Over the past couple of years that has actually been a good deal for tenants because the rate of inflation is so low, and normally there is a minimum increase. Check where they get the CPI numbers from. It can be a bit of a gamble, as inflation fluctuates from year to year.

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        • #5
          Originally posted by Harmony Brewco
          To sign a lease with your increase pegged to the CPI (consumer price index) is to peg your increase to the rate of inflation. Over the past couple of years that has actually been a good deal for tenants because the rate of inflation is so low, and normally there is a minimum increase. Check where they get the CPI numbers from. It can be a bit of a gamble, as inflation fluctuates from year to year.

          You want gambling? We had to peg our lease to the price of the Swiss Franc as the owner wanted to have nothing to do with the dollar and he wasn't budging. First he wanted it pegged to gold, then to oil (and I told him no to both as they are too volatile) so he finally agreed to the Swiss Franc which at the point of signing the lease had just had a good spike, thus so far so good but there is some definite risk there. Honestly I can't blame him for not wanting to have anything to do with a currency that is being printed like it is going out of style.

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