Rent Indexation and Price Increase: How to Write It Correctly in the Contract

Rent indexation and increases: practical guide 🏡

Indexation clauses let both landlord and tenant plan for future changes. When written clearly, they reduce disagreements and provide predictable outcomes. Below — usable clause types, drafting tips, notice rules and example wording you can adapt.

Why include an indexation clause? ✅

• Protects the landlord against loss of real income due to rising costs.
• Gives tenants predictability by setting a transparent, agreed method for changes.
• Avoids ad hoc renegotiations and legal disputes if market conditions change.

Common approaches to indexation

1. Fixed percentage

• Simple: rent increases by a set percent at defined intervals.
• Good when parties want certainty and minimal calculation.

2. CPI or inflation‑linked index

• Ties rent changes to an official consumer price index or similar measure.
• Requires the contract to name the exact source and publication used.

3. Currency or hybrid indexing

• Useful when payments are in one currency but costs relate to another.
• A hybrid can combine a baseline percentage with an index to smooth volatility.

4. Market rent review

• Rent is reviewed against comparable market rents at agreed intervals.
• Common in commercial leases; requires clear comparables and a review process.

Key elements to include in the clause 📑

• Frequency: e.g. annually or at other agreed intervals.
• Calculation formula: precise mathematical expression (e.g. “New rent = Base rent × (1 + index change)”).
• Data source: specify the exact index and where to find it.
• Caps and floors: maximum and minimum annual changes to avoid extremes.
• Notice period: how far in advance of the change the other party must be informed.
• Review triggers: events that allow renegotiation (major tax changes, structural costs).
• Dispute resolution: mediation, arbitration or court pathway.

Practical wording examples ✍️

• Fixed percent example: “Rent will be increased each anniversary by X% (for example, a typical range might be low single digits).”
• CPI example: “Rent will be adjusted annually according to the Consumer Price Index (CPI) published by [named source]. New rent = Base rent × (1 + percentage change in CPI).”
• Cap/floor: “Any annual adjustment shall not exceed Y% and shall not be less than Z%.”

(Percent values above are illustrative; adapt to local market realities.)

Notice and timing ⏳

• State a clear notice period (commonly several weeks to a few months) and the method of delivery (written notice, email with delivery confirmation).
• A defined notice procedure prevents later disagreements about whether an increase was properly communicated.

Dealing with additional charges and utilities

If operating expenses or utilities are passed through to the tenant, consider separate indexing rules or explicitly link them to the same or a different index to avoid double-counting.

Practical negotiation tips 💬

• Landlords: prefer clarity and a reliable index; consider an upper limit to keep offers attractive.
• Tenants: insist on transparency, reasonable caps and advance notice; negotiate a right to review if the formula produces unexpected results.
• Both: include a clear dispute-resolution step — it’s cheaper than litigation.

Legal checks and registration ⚖️

Laws on lease registration and formalities vary. Even when registration isn't required, have a local legal review to ensure terms are enforceable and unambiguous.

Final thoughts

A clear, balanced indexation clause brings certainty and trust. Use a simple formula, name the data source and agree on notice and limits.

If you need help drafting or checking a lease, the BuyHome team can advise and adapt clauses to your property and goals. Browse available properties or ask us to review your lease: https://buyhome.ge/en/search

Contact BuyHome — we’ll help you draft a fair and practical indexation clause and find the right property.