What is an index lease primarily tied to?

An index lease is primarily tied to the Consumer Price Index (CPI) because this type of lease agreement includes a provision that requires rent adjustments based on fluctuations in the CPI. The CPI measures changes in the price level of a basket of consumer goods and services and provides a method to maintain the purchasing power of rental income over time. This means that as the cost of living increases, so does the rent, helping landlords keep pace with inflation while providing tenants with predictable rent increases based on the agreed-upon index. This link between rent and the CPI is crucial for both parties to ensure that the economic impact of inflation is fairly managed over the lease term.

Other options like tax increases, property market value, and rental vacancies do not directly correlate with the structure of an index lease, which expressly relies on a consistent and recognized economic indicator like the CPI for adjustments to rental payments.