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Graduated Rental Lease
A graduated rental lease is a tenancy agreement in which the landlord offer low rental to the tenant for the initial period, but increases over time to reflect the market.
In exchange for the low rental rates in the early period of such leases, sometimes commercial tenants can knowingly agree to hefty rental increases in future via the graduated rental lease.
It is also why such rental agreements are called step-up leases.
This is because businesses might see start-up capital as a more critical issue to start with. Increases in rental can be managed in future with cash flow as the business picks ups.
Another reason is that the increases is a way for the landlord to recoup losses incurred during the initial period of low rentals.
Graduated rental arrangements are great ways for landlords to attract commercial tenants especially when it concerns a new building with unproven human traffic