What type of lease allows for rent to be adjusted based on changes in the cost of living?

An index lease is the type of lease that allows for rent adjustments based on changes in the cost of living, often linked to a specific index such as the Consumer Price Index (CPI). This means that periodically, usually on an annual basis, the rent can be adjusted to reflect the inflation rate or other specified economic indicators. The purpose of an index lease is to maintain the purchasing power of the rental income over time, ensuring that both the landlord and tenant can adjust to fluctuating economic conditions.

In contrast, a flat lease specifies a fixed rental amount for the entire lease term without adjustments, while a variable lease generally allows for predetermined increases but not necessarily tied to any index. A percentage lease involves rent based on a percentage of the tenant's sales, which also does not directly tie to the cost of living adjustments. The index lease uniquely serves the purpose of adapting rental costs in response to economic changes, making it a beneficial arrangement for accommodating inflationary pressures.