Property Management
What is 'rent escalation' in a commercial lease and what forms does it take in Hawaii?
AA. An unauthorized increase in rent that violates the lease terms
BB. Contractual provisions for increasing rent over the lease term; common forms include fixed dollar increases, fixed percentage increases, CPI adjustments, and percentage of sales (for retail)✓ Correct
CC. The difference between current market rent and the contract rent in a lease
DD. A court-ordered increase in rent based on increased property values
Explanation
Rent escalation provisions in commercial leases protect landlords from inflation erosion over long lease terms. Common types: fixed annual increases (e.g., 3% per year), Consumer Price Index (CPI) adjustments tied to inflation, stepped increases at specified intervals, and percentage rent clauses (common in retail—a base rent plus a percentage of tenant's gross sales above a threshold).
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