Leases and transactions

Indexed rent

Rent linked to a price index, usually the consumer price index.

Indexation clauses adjust rent to inflation, either fully, partially or once a threshold is reached. They protect investors' real income and increase tenants' costs in periods of high inflation.

Mechanics

Indexation clauses usually refer to the consumer price index for Germany published by the Federal Statistical Office. They govern the base month, the threshold for adjustment, the share passed through, automatic adjustment or adjustment on request and, where applicable, caps. When the index moves to a new base year, figures must be converted.

Legal guard rails

Under the Price Clause Act, indexation clauses in commercial leases are permissible in particular if the landlord is bound for at least ten years or the tenant has the right to extend the term to at least ten years. The clause must be sufficiently specific and must not unreasonably disadvantage either party.

Index: German CPI, Destatis
Minimum commitment: usually 10 years

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