What type of lease includes a clause to compensate for inflation and rising operating costs?

An index lease is specifically designed to address fluctuations in economic conditions, such as inflation and rising operating costs. This type of lease includes a clause that links rental payments to a specified index, often tied to the Consumer Price Index (CPI) or another economic measure. This enables the rent to increase or decrease at regular intervals based on the designated index, providing a means for both landlords and tenants to adjust the lease terms to reflect current economic realities.

In contrast, a gross lease typically involves a fixed rental amount where the landlord covers all operating expenses, making it less adaptable to inflation since the tenant does not bear the additional costs. A net lease involves the tenant paying a portion of the operating expenses separately from the base rent but does not automatically adjust for inflation. A flat lease is another fixed rental arrangement, where the rent remains constant throughout the lease term without any provisions for adjustments based on external economic factors. Thus, an index lease stands out for its built-in mechanism to respond to inflationary pressures.