 |
Investopedia explains 'Graduated Lease'
Graduated leases are intended to protect the interests of the owner/lessor of the property. In many cases, the value of the leased property increases and the payments can be adjusted accordingly. For example, if a company has a 99 year lease on land under a graduated lease, the payments can be adjusted every 10 years to reflect the current market value of the land. If market values increase, this helps protect the land owner against losses resulting from payments that would be too low for current market conditions. In a different scenario, a graduated lease may be used to entice a company to lease a property that in the beginning has relatively small payments. As time passes, the payments increase on a regular basis, such as with an annual rent increase of 5%. This scenario is helpful to entrepreneurs who need to save money in the first few years of a lease while the business is being established.
|