Escalations In Commercial Office Leasing

Different types of estate leases have different forms. Residential real estate leases have a fixed lease amount that needs to be paid once and no increase in the lease amount is expected. Commercial real estate leases do not remain fixed any time during their lease term they can face rent escalations. Below written are some points which provide us information about rent escalations, its various types and its necessity.

Defining rent escalations

Rent escalations may be defined as the increase in the rent that is made from time to time. Annual escalation is a type of increase that is done in the rent on annual basis. The rising prices of commodities and the operating cost of the premises that the owner has to bear, force him for rent escalations. For commercial building leases there are rent escalation clauses in their commercial lease document. These clauses guide the tenant about the time period when the escalation is supposed to happen.

Kind of rent escalations

A variety of escalations can be witnessed in commercial estate field. The most common type of expenditure is that for operation purposes. The cost for using any source of energy like electricity, water, telephone bills etc are always on a rising trend especially the usage of all these components in a commercial place is extremely high. The owner of the commercial building cannot afford all these expenses so he hikes the lease amount. There are some other things that come under operation costs they are removal of waste, upkeep of the building, insurance etc.

Increase in real estate taxes can result in rent escalation. One thing for this type of escalation is that it should be written in the clause that if the real estate taxes increase there will be a rent escalation. The reason behind this is that increase in taxes cannot be calculated as we are not definite about the tax amount that can be increased.

Importance of rent escalations

Tenants want that commercial lease amount for them should remain as it is; that is they do not want to have any increase in their lease amount. But the costs of operation most of the time increase and it is very difficult for the owner to manage such costs. So the rent escalation clauses are important, they help the owner of a commercial building to increase the lease amount. Increasing the lease amount helps the landlord to pay the operation costs as well as save some money for himself.

The above written are some of the facts about commercial real estate lease. The rent escalations are important from the owner’s point of view because these escalations save him from the burden of increasing costs of commodities like operating costs. If residential buildings are taken into account then we don’t see any escalations the reason behind that is in dwelling places the costs of utility bills and other bills are far too less as compared to commercial buildings so the escalations are not realized.

Summarizing the entire scenario we can say that commercial real estate escalations are important because they save the property owner from any loss. Moreover he earns profit that he wanted to get by putting his property on lease.

Harji Realtors is one of the leading real estate agents in the region of Chandigarh, Mohali and Kharar. For more information on great deals in Sunny Enclave Flats and the best Bajwa Developers check out our website

For complete information on buying Flat in Mohali or for buying any Plot in Mohali contact us now