Ground Leases•9 min read•March 1, 2022
Ground Lease Escalation Structures: A Deep Dive
Understanding how escalation provisions affect ground lease value for both parties.
Escalation provisions determine how ground rent increases over the lease term. The structure directly affects income predictability for landlords and expense certainty for tenants.
Common Structures
- Fixed increases: Predetermined percentage or dollar amounts
- CPI-linked: Inflation protection for landlord
- Stepped schedules: Predetermined rent increases at intervals
- Hybrid approaches combining elements
Negotiation Considerations
Escalation structures should balance landlord income protection with tenant financeability. Caps and floors can limit extreme outcomes for both parties.
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