What distinguishes a graduated lease from a fixed lease?

A graduated lease is characterized by rent increases that occur at predetermined intervals. This feature provides both the landlord and the tenant a clear understanding of how rental payments will evolve over time. For example, a graduated lease may specify that rent will increase by a certain percentage annually or after a set period, allowing tenants to plan for future costs and landlords to structure their income projections accordingly.

In contrast, a fixed lease maintains a constant rent amount for the duration of the lease term, meaning tenants pay the same rental rate each month without any anticipated increases. This stability can be beneficial for tenants who prefer consistent monthly expenses.

The rarity of graduated leases in commercial real estate does not define their main characteristic; rather, it reflects market trends and preferences. While there may be leases without a specified term length, this aspect is not inherently related to the graduated structure. Thus, the defining feature of a graduated lease is the scheduled rent increases.